- Branded Business up 4.0% Over Prior Year Third
Quarter
- Double-Digit Growth in June-to-Date Written Orders
- Improved Industrial Margin Despite Supply-Chain
Challenges
- 3Q2020 Operating Result Almost at Break-Even
- Finalized a New External Production Partnership in Eastern
Europe
- Order Backlog Increased
The Board of Directors of Natuzzi S.p.A. (NYSE: NTZ) (“Natuzzi”
or the “Company”) approved today its 2020 unaudited third quarter
and first nine months consolidated financial results.
Update Of Covid-19 Impact On The
Group’s Operations
Third quarter 2020 saw a gradual return of the Group’s
operational conditions to normality. Points of sales and factories
(with the exception of our Brazilian plant being closed during the
first two weeks of July) were operating at almost pre-COVID
levels.
The Company's management continued to adopt a series of
measures, some of which are temporary in nature, to limit the
negative effects of the pandemic on business, with the primary aim
of preserving the Group's liquidity.
The initiatives so far undertaken by the Group include, among
others: a) temporary lay-off programs in Italy, Spain, UK,
Switzerland, Romania, China, Brazil and the USA. In Italy in
particular, the COVID-related temporary lay-off program is
currently applied to a large part of workers and employees and is
supposed to be in force until the first part of next year; b)
temporary rent reduction or rent payment suspension to compensate
for the closure of the Group’s stores during the lockdown; c) the
reduction of marketing expenses and other operating expenses; d)
the deferral of investments; e) other COVID-related contributions
obtained in Switzerland, Brazil, USA, UK, China and Romania.
Lockdown measures were initially lifted around the world between
the end of the second quarter and the beginning of the third
quarter, and, as soon as our points of sales reopened, the demand
for our products started to gradually recover toward prior year’s
levels. The order flow from June to-date remains robust (+21.5%)
and still above our expectations.
Such order flow, which has outpaced our production capacity,
coupled with the difficulties of some suppliers in meeting our
increased demand have resulted in the current 70% increase in
product backlog, compared to the beginning of the year. We are
speeding up our industrial operations and working closely with our
suppliers to increase the Group’s production capacity,
accordingly.
Despite the positive trend in written orders, we are cautious
about the prospects of the business environment in the short-term,
mainly in consideration of the restrictions measures already taken
in many Countries following the second wave of contagions,
particularly aggressive in Europe.
Third Quarter 2020
Results
Consolidated net sales for the third quarter of 2020 were €84.4
million, down 4.2% from €88.1 million reported in 2019 third
quarter.
While the order flow accelerated in the second part of the
quarter, the duration of our order-product cycle, which requires
for overseas deliveries about three months for manufacturing,
shipping and then final delivering, has allowed us to transform
only part of the increased order flow into revenues within the end
of third quarter.
Considering the Group’s core business only (upholstery,
accessories and home furnishings), net sales were €80.0 million,
down 4.4% compared to last year third quarter, due to the 35.2%
decrease in Private Label sales that more than offset the 4.0%
increase in the Natuzzi sales.
Other sales were €4.4 million.
The 4.0% increase in Natuzzi branded revenues was the result of
the 26.3% increase in the EMEAI region, the 0.7% increase in the
Asia-Pacific region, partly offset by the 17.5% decrease in the
Americas.
Sales from the Americas were particularly affected by the weak
demand extending through early summer, due the pandemic, whose
initial wave of contagion has never abated in that continent. Order
flow from the Americas started to increase only from August. While
we gradually speeded up our industrial operations to meet North
American customers’ demand, the lead time for this market has not
allowed us to transform such production into invoice within the
third quarter.
Natuzzi branded sales, that are generated by both our direct
retail network (Directly Operated Stores, or DOS, and concessions)
and third-party operated points of sale, were €68.4 million and
represented 85.5% of the Group’s core business, versus 78.6% in the
third quarter of 2019.
The Group directly operates 55 mono-brand DOS, of which 39
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 third quarter of 2020, direct retail sales were €13.9
million, up 3.7% versus the same period of 2019, as the result of
the 23.9% increase in our DOS located in the Europe, and the 18.9%
decrease in the Americas. Sales generated by the Group’s direct
retail network represented 17.4% of core business compared to 16.0%
in 2019 same period. On a Like-for-like basis, direct retail
network during the third quarter of 2020 delivered a positive
result of €0.3 million at the store level, mainly due to the
adoption of temporary measures to reduce both the fixed cost of
labor and rent-related expenses.
The Natuzzi division also includes sales generated by
third-party operated mono-brand points of sales (franchised
operated stores, or FOS, and galleries), that were €54.5 million in
2020 third quarter, up 4.1% compared to 2019 third quarter, as a
result of the 27.1% increase in the EMEAI region, the 0.7% increase
in Asia-Pacific region, partially offset by the 17.1% decrease in
the Americas.
Sales generated by the unbranded division, addressing the
mass-merchant distribution, were €11.6 million, down 35.2% compared
to 2019 third quarter. We continue to gradually increase the
external production capacity from Vietnam with the aim of
increasing competitiveness and improving margins of our unbranded
business in the North American market. Lastly, we have recently
started a new partnership in Eastern Europe for further outsourced
production of unbranded products for the EMEAI market. We are
currently doing the necessary tests with the goal to start this
production within year-end.
3Q2020 Gross Margin
Third quarter 2020 consolidated gross margin was 32.5%, compared
to 28.7% in 2019 same quarter, despite lower volumes, thanks in
particular to the adoption of COVID-related temporary public
measures to lower the labor costs (for a saving of €1.9 million), a
favorable product mix, more sales from the directly operated stores
and the rightsizing of the Chinese manufacturing plant completed in
the quarter. During the quarter, the Company continued to benefit
from a favorable trend in raw materials, even though an
inflationary pressure in raw materials starts to arise.
3Q2020 Operating
Expenses
Operating expenses, which include Selling, Administrative, other
operating income/expenses and the impairment of trade receivables,
were €27.9 million (or 33.0% on revenues), decreasing significantly
from €34.0 million (or 38.6% on revenues) in 2019 third
quarter.
The €6.1 million reduction in the quarter was mainly
attributable to adoption of temporary COVID-related public measures
to lower the cost of labor (for a saving of €1.8 million) and rent
expenses (for a saving €0.9 million), and also thanks to specific
actions to reduce advertising, fairs and travel expenses (for a
saving of €1.1 million).
3Q2020 Results
The Group reported an operating loss of €0.4 million, versus an
operating loss of €8.7 million in 2019 third quarter. The Company
accounted for €0.6 million of one-off costs deriving from the sale
of a land located in Italy. Net of such one-time costs, the
operating results would have been slightly positive.
Depreciation and amortization in the quarter accounted for a
total of €5.9 million.
Net Profit deriving from the 49% share of the Chinese vehicle
was €0.1 million.
Loss for the period was €4.4 million, including a withholding
tax of €0.8 million accounted to move cash from our Chinese
subsidiaries to the Company.
First Nine Months 2020
Results
Consolidated net sales for the first nine months of 2020 were
€228.4 million, down 20.2% compared to the first nine months of
2019.
Considering the Group’s core business only, net sales were
€218.1 million, down 20.1% compared to 2019 same period, as a
result of the 13.4% decrease in sales for the Natuzzi division and
the 44.9% decrease in sales for the Private Label business.
Non-core sales were €10.3 million.
Gross margin for 2020 first nine months was 31.4% versus 29.0%
in 2019 same period.
The Group reported an operating loss of €13.0 million during the
first nine months of 2020 versus an operating loss of €19.5 million
in the first three quarters of 2019.
The 2020 first nine months operating loss also includes €4.0
million of 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 nine months of 2020.
The Group reported a loss for the period of €21.3 million,
versus a loss of €26.8 million in 2019 same period.
As of September 30, 2020, cash and cash equivalents in the
statement of financial position were €39.8 million, compared to
€33.2 million as of June 30, 2020 and to €29.5 million at the end
of March 2020.
The Group’s net financial position before lease liabilities
(defined as “Cash and cash equivalents,” less “Bank overdraft and
short-term borrowings,” less “Current portion of long-term
borrowings” and less “Long-term borrowings”) was negative at -€5.7
million, affected by the different accounting treatment of trade
receivables under the securitization agreement renewed last July
(the “Agreement”). As the Agreement provides for a trade
receivables assignment subject to the final payment (pro-solvendo),
the trade receivables that can be sold under the Agreement are now
valued at their gross value, whereas the relevant short-term credit
collected by the Company is now separately considered and included
within the item “Bank overdraft and short-term borrowings”.
During the first nine months of 2020, net cash provided by
operating activities less net investments was positive at €4.6
million.
Chairman and CEO, Pasquale Natuzzi, commented: “The actions
taken in response to these unprecedent times have begun to
translate into improvements during the quarter.
Our branded revenues overall increased during the quarter, but
with different dynamics within it. While the European market has
significantly contributed to the positive sales performance, the
North American market has suffered from the weak order flow
extending through the first part of third quarter, because of the
pandemic. This, coupled with the specific lead times for overseas
shipping, resulted in the unpleasant level of delivered sales in
the region. Indeed, differently from other major markets, order
flow from North America started to accelerate only in the second
part of the third quarter resulting in a double-digit growth for
the entire quarter. We expect a positive contribution from this
important market in the last three months of the year.
Overall, written orders for our branded products has remained
sustained, also in October and November, allowing the Group to
recover most of the business lost due to the global sanitary
emergency and almost close the gap with the same-period last
year.
Because of the pandemic, we experienced supply-chain imbalances,
as some of our suppliers were not able to adjust their production
capacity to our growing demand. These two factors, strong demand
and supply-chain challenges, are behind the current level of the
backlog, that has increased by 70% compared to the beginning of the
year. While keeping our workplaces safe or working from remote, we
are now focused on intensifying the industrial and shipping
operations, to recover the usual service level for our
customers.
The trend in the unbranded business remains weak, but we
continue to increase the external production level from Vietnam
with the aim of increasing competitiveness and improving margins
for this line of business. With the same goal in mind, we have
reached an agreement with an external manufacturer located in
Eastern Europe to serve the EMEAI market. The testing phase is
ongoing: as soon as quality and cost checks give the expected
results, we will speed-up the production.
Then, we are progressing in the sale of a non-strategic
subsidiary located in Italy, that, once finalized, should
contribute to improve flexibility of our overhead structure. We
intend to continue in this direction going forward.
We are also progressing in negotiations with a pool of banks for
the granting of a loan guaranteed by the Italian Government in
order to let the Company have higher financial flexibility to face
these uncertain times.
The recent resurgence of the virus globally, with particular
reference to Europe, has led various Governments to re-introduce
virus-containment measures, resulting, among others, in the closure
of points of sale from the beginning of November through early
December, as is the case in France, the UK, in some areas in Italy,
and other Countries.
Therefore, we are cautiously optimistic, based on current demand
trends, but are aware that uncertainties are still a predominant
factor for our industry. For this reason, the execution of our
strategic plans will necessarily be strictly led by a conservative,
rigorous approach of the cash 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 third quarter of
2020 and 2019on the basis of IFRS -IAS (expressed in millions
Euro)
Three months ended on Change Percentage of
Sales 30-Sep-20 30-Sep-19 %
30-Sep-20 30-Sep-19 Revenues
84.4
88.1
-4.2%
100.0%
100.0%
Cost of Sales
(56.9)
(62.8)
-9.3%
-67.5%
-71.3%
Gross profit
27.4
25.3
8.5%
32.5%
28.7%
Other income
1.1
1.1
1.3%
1.3%
Selling Expenses
(20.7)
(26.0)
-20.6%
-24.5%
-29.6%
Administrative expenses
(7.5)
(8.1)
-7.7%
-8.8%
-9.2%
Impairment on trade receivables
0.0
(0.9)
0.0%
-1.0%
Other expenses
(0.8)
(0.1)
-1.0%
-0.1%
Operating profit/(loss)
(0.4)
(8.7)
-0.5%
-9.9%
Finance income
0.1
0.1
Finance costs
(1.8)
(2.4)
Net exchange rate gains/(losses)
(1.1)
(0.8)
Net finance income/(costs)
(2.8)
(3.1)
Share of profit/(loss) of equity-method investees
0.1
0.4
Profit/(Loss) before tax
(3.1)
(11.4)
-3.6%
-12.9%
Income tax expense
(1.3)
(0.3)
-1.6%
-0.3%
Profit/(Loss) for the period
(4.4)
(11.7)
-5.2%
-13.2%
Profit/(Loss) attributable to: Owners of the
Company
(4.2)
(11.6)
-5.0%
-13.1%
Non-controlling interests
(0.2)
(0.1)
-0.2%
-0.1%
Profit/(loss) per Ordinary Share
(0.08)
(0.21)
Natuzzi S.p.A. and Subsidiaries Unaudited
consolidated statement of profit or loss for the nine months of
2020 and 2019on the basis of IFRS -IAS (expressed in millions
Euro)
Nine months ended on Change Percentage of
Sales 30-Sep-20 30-Sep-19 %
30-Sep-20 30-Sep-19 Revenues
228.4
286.4
-20.2%
100.0%
100.0%
Cost of Sales
(156.6)
(203.4)
-23.0%
-68.6%
-71.0%
Gross profit
71.8
83.0
-13.5%
31.4%
29.0%
Other income
3.0
3.8
1.3%
1.3%
Selling Expenses
(62.9)
(79.4)
-20.8%
-27.5%
-27.7%
Administrative expenses
(21.9)
(25.1)
-12.7%
-9.6%
-8.8%
Impairment on trade receivables
(1.8)
(1.3)
-0.8%
-0.4%
Other expenses
(1.2)
(0.5)
-0.5%
-0.2%
Operating profit/(loss)
(13.0)
(19.5)
-5.7%
-6.8%
Finance income
0.2
0.3
Finance costs
(4.8)
(7.1)
Net exchange rate gains/(losses)
(3.1)
(0.9)
Net finance income/(costs)
(7.6)
(7.7)
Share of profit/(loss) of equity-method investees
0.9
1.4
Profit/(Loss) before tax
(19.7)
(25.8)
-8.6%
-9.0%
Income tax expense
(1.6)
(1.0)
-0.7%
-0.4%
Profit/(Loss) for the period
(21.3)
(26.8)
-9.3%
-9.4%
Profit/(Loss) attributable to: Owners of the
Company
(20.8)
(26.7)
-9.1%
-9.3%
Non-controlling interests
(0.5)
(0.1)
Profit/(loss) per Ordinary Share
(0.38)
(0.49)
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-Sep-20 31-Dec-19 ASSETS Non-current
assets
189.2
212.5
Current assets
153.7
156.9
TOTAL ASSETS
342.9
369.4
EQUITY AND LIABILITIES Equity attributable to Owners
of the Company
79.9
103.1
Non-controlling interests
0.4
1.7
Non-current liabilities
113.5
112.6
Current liabilities
149.1
152.0
TOTAL EQUITY AND LIABILITIES
342.9
369.4
Natuzzi S.p.A. and Subsidiaries Unaudited
consolidated statements of cash flows (condensed) (Expressed in
millions of Euro)
30-Sep-20 31-Dec-19
Net cash provided by (used in) operating activities
3.8
4.7
Net cash provided by (used in) investing activities
0.8
(3.3)
Net cash provided by (used in) financing activities
(4.0)
(24.2)
Increase (decrease) in cash and cash equivalents
0.6
(22.8)
Cash and cash equivalents, beginning of the year
37.8
60.4
Effect of movements in exchange rates on cash held
(0.7)
0.3
Cash and cash equivalents, end of the period
37.7
37.8
For the purpose of the statements of cash flow,
cash and cash equivalents comprise the following: (Expressed in
millions of Euro)
30-Sep-20 31-Dec-19 Cash and cash
equivalents in the statement of financial position
39.8
39.8
Bank overdrafts repayable on demand
(2.1)
(2.0)
Cash and cash equivalents in the statement of cash flows
37.7
37.8
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201127005588/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