NTZ Natuzzi S P A

The Board of Directors of Natuzzi S.p.A. (NYSE: NTZ) (�Natuzzi� or �the Company�), the world�s leading manufacturer of leather-upholstered furniture, today announces the approval of the consolidated financial statements for the third quarter 2006. NET SALES Natuzzi third quarter 2006 total net sales were at EUR 158.5 million, or $ 202.0 million, up 7.7 percent as compared to third quarter 2005. During the first nine months of the year, total net sales increased by 13.1 percent with respect to the same period of 2005 at EUR 542.4 million, or $ 675.6 million. During the third quarter 2006, upholstery net sales were at EUR 142.0 million, or $ 180.9 million, up 8.8 percent over the third quarter of last year. During the same period, total seats sold increased by 10.0 percent. In the first nine months of 2006, the Company sold 2,236,121 seats, 11.4 percent more than the same comparable period of last year. Other sales (principally living room accessories, and raw materials produced by the Company and sold to third parties) decreased 1.2 percent to EUR 16.5 million, or $ 21.0 million, over the third quarter of last year. During the three months ended on September 30, 2006, net sales in the Americas increased by 1.3 percent over the third quarter 2005 at EUR 60.1 million, or $ 76.6 million, by 12.1 percent in Europe at EUR 68.8 million, or $ 87.7 million, by 33.7 percent in the rest of the world at EUR 13.1 million, or $ 16.7 million. In the third quarter 2006, two new stores were opened in China, whereas three stores were closed (one in Italy, one in UK and one in Switzerland), thus bringing the total number of stores to 278 as at September 30, 2006. In the same period, twelve galleries were opened, so that the total number of Natuzzi galleries was 560 as at September 30, 2006. Leather-upholstered furniture net sales were at EUR 123.4 million, or $ 157.2 million, up 11.7 percent over third quarter 2005, whereas fabric-upholstered net sales were down 7.0 percent at EUR 18.6 million, or $ 23.7 million. During the third quarter 2006, net sales for the Natuzzi branded products increased by 2.8 percent over the third quarter 2005 at EUR 83.8 million, or $ 106.8 million, and by 18.8 percent for the Italsofa products at EUR 58.2 million, or $ 74.2 million. GROSS PROFIT & OPERATING INCOME For the three months ended on September 30, 2006, gross profit increased at EUR 51.1 million, or $ 65.1 million, as compared to EUR 48.6 million, or $ 59.3 million, reported for the third quarter of the previous year. Gross profit margin slightly decreased at 32.2 percent, from 33.0 percent reported for the third quarter of 2005, mainly due to the unfavorable currency effect on upholstery net sales. The Company reported an operating loss of EUR 1.1 million, or $ 1.4 million, as compared to a break even in the third quarter 2005. FOREX & TAXES During the quarter ended on September 30, 2006, the Company reported a net foreign exchange loss of EUR 0.4 million, or a loss of $ 0.5 million, as compared to a net foreign exchange loss of EUR 0.9 million, or a net foreign exchange loss of $ 1.1 million, reported in the same comparable period of last year. For the third quarter of 2006, the Company had income tax credit of EUR 0.2 million, or $ 0.3 million, versus income taxes of EUR 0.5 million, or $ 0.6 million, reported last year. NET INCOME & EARNINGS PER SHARE For the third quarter 2006, the Company reported net income of EUR 0.8 million, or $ 1.0 million, versus net losses of EUR 2.0 million, or $ 2.4 million, reported in the same quarter of last year. Earning per share (ADR) was EUR 0.01, or $ 0.01, as compared to net loss per share of EUR 0.04, or $ 0.05, reported in third quarter 2005. For the first nine months, in 2006 the Company reported net earnings of EUR 17.5 million, or $ 21.8 million, versus net losses of EUR 13.9 million, or $ 17.6 million, for the same comparable period in 2005 CASH FLOW During the nine month period ended on September 30, 2006, net cash flow from operations increased at EUR 53.6 million, or $ 66.8 million, from EUR 16.9 million, or $ 21.3 million, generated for the same period in 2005. On per ADR basis, net operating cash flow was EUR 0.98, or $ 1.22, up from EUR 0.31, or $ 0.39, generated during the first nine months of 2005. Ernesto Greco, Chief Executive Officer of the Natuzzi Group, commented: �As in the prior quarter, the positive net sales performance has not been accompanied by a similar order flow. In fact, in the last few months the Group has been reporting a decrease in the order flow which could lead us to an adjustment of the production level. This decrease is mainly due to the general weak retail environment for home furnishing, confirmed at recent High Point furniture market, accompanied by persisting unfavorable currency conditions. Despite this, the Company expects to report for the full year 2006 an high single digit increase in revenues over year 2005 thanks to the existing order back log. In this challenging environment, we continue to invest in the Natuzzi brand. At the same time, we are focusing our efforts on an extensive process reengineering program that should improve the overall efficiency of the Group and on the reorganization of sales activities so to better envisage customers� needs and improve their satisfaction. Besides, we are finalizing a new exclusive spring collection for which we expect to obtain a successful reception from our customers at next January Cologne furniture fair. The combination of the above initiatives � concluded Greco - should better position the Group for future sales growth and profitability recovery�. CONVERSION RATES The third quarter 2006 and 2005 dollar figures presented in this announcement were converted at an average noon buying rate of $1.2742 per EUR and $1.2196 per EUR, respectively. The nine months figures for 2006 and 2005 were converted at an average noon buying rate of $ 1.2455 per EUR and $ 1.2628 per EUR, respectively. MONTELEONE RESIGNED FROM THE BOARD OF DIRECTORS Gianluca Monteleone, Group Marketing Director until October 31st, 2006, resigned today from the Board of Directors. For the time being, he will not be replaced. THIRD QUARTER 2006 TELECONFERENCE Ernesto Greco, Chief Executive Officer, Filippo Simonetti, Chief Financial Officer, and Nicola Dell�Edera, Finance Director, will discuss financial results, followed by a question and answer session, in a teleconference at 10:00 a.m. New York time (3:00 p.m. London time � 4:00 p.m. Italian time) on Thursday November 16, 2006. ABOUT NATUZZI S.P.A. Founded in 1959 by Pasquale Natuzzi, Natuzzi S.p.A. designs and manufactures a broad collection of leather-upholstered residential furniture. Italy�s largest furniture manufacturer, Natuzzi is the global leader in the leather segment, exporting its innovative, high-quality sofas and armchairs to 123 markets on 5 continents. Since 1990, Natuzzi has sold its furnishings in Italy through the popular Divani & Divani by Natuzzi chain of 125 stores, and 1 Natuzzi Store. Outside Italy, the Company sells to various furniture retailers, as well as through 152 licensed Divani & Divani by Natuzzi and Natuzzi Stores. Natuzzi S.p.A. was listed on the New York Stock Exchange on May 13, 1993. The Company is ISO 9001 and 14001 certified. FORWARD-LOOKING STATEMENTS Statements in this press release other than statements of historical fact are �forward-looking statements�. Forward�looking statements are based on management�s current expectations and beliefs and therefore you should not place undue reliance on them. These statements are subject to a number of risks and uncertainties, including risks that may not be subject to the Company�s control, that could cause actual results to differ materially from those contained in any forward-looking statement. These risks include, but are not limited to, fluctuations in exchange rates, economic and weather factors affecting consumer spending, competitive and regulatory environment, as well as other political, economical and technological factors, and other risks identified from time to time in the Company�s filings with the Securities and Exchange Commission, particularly in the Company�s annual report on Form 20-F. Forward looking statements speak as of the date they were made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated Statement of Earnings for the quarters ended on September 30, 2006 and 2005 on the basis of Italian GAAP (Expressed in millions of EUR except per share data) � � � � � � � � � Three months ended on % Over Percentage of Sales � 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 Upholstery net sales 142.0� 130.5� 8.8% 89.6% 88.7% Other sales 16.5� 16.7� ( 1.2)% 10.4% 11.3% Total Net Sales 158.5� 147.2� 7.7% 100.0% 100.0% Purchases (69.6) (63.4) ( 9.8)% ( 43.9)% ( 43.1)% Labor (24.0) (22.1) ( 8.6)% ( 15.1)% ( 15.0)% Third-party Manufacturers (3.6) (5.2) 30.8% ( 2.3)% ( 3.5)% Manufacturing Costs (8.3) (8.5) 2.4% ( 5.2)% ( 5.8)% Inventories, net (1.9) 0.6� ( 416.7)% ( 1.2)% 0.4% Cost of Sales (107.4) (98.6) ( 8.9)% ( 67.8)% ( 67.0)% Gross Profit 51.1� 48.6� 5.1% 32.2% 33.0% Selling Expenses (42.9) (39.3) ( 9.2)% ( 27.1)% ( 26.7)% General and Administrative Expenses (9.3) (9.3) 0.0% ( 5.9)% ( 6.3)% Operating Income (Loss) (1.1) 0.0� N.M. ( 0.7)% 0.0% Interest Income, net 0.3� 0.0� 0.2% 0.0% Foreign Exchange, net (0.4) (0.9) ( 0.3)% ( 0.6)% Other Income, net 1.7� (0.7) 1.1% ( 0.5)% Earnings (Losses) before taxes and minority interest 0.5� (1.6) 131.3% 0.3% ( 1.1)% Income taxes 0.2� (0.5) 0.1% ( 0.3)% Earnings (Losses) before minority interest 0.7� (2.1) 133.3% 0.4% ( 1.4)% Minority Interest (0.1) (0.1) ( 0.1)% ( 0.1)% Net Earnings (Losses) 0.8� (2.0) 140.0% 0.5% ( 1.4)% Earnings (Losses) Per Share 0.01� (0.04) � � � Average Number of Shares Outstanding* 54,738,538� 54,681,628� � � � (*) Net of shares repurchased N.M. = Not meaningful � � � � � � � � � � � Key Figures in U.S. dollars (millions) Three months ended on � � � September 30, 2006 � � September 30, 2005 � � Total Net Sales 202.0� 179.5� Gross Profit 65.1� 59.3� Operating Income (Loss) (1.4) 0.0� Net Earnings (Losses) 1.0� (2.4) Earnings (Losses) per Share 0.01� (0.05) Average exchange rate (U.S. dollar per Euro) � 1.2742� � � � 1.2196� � � NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated Statement of Earnings for nine months ended on September 30, 2006 and 2005 on the basis of Italian GAAP (Expressed in millions of EUR except per share data) � � � � � � � � � Nine months ended on % Over Percentage of Sales � 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 Upholstery net sales 486.1� 421.9� 15.2% 89.6% 88.0% Other sales 56.3� 57.5� ( 2.1)% 10.4% 12.0% Total Net Sales 542.4� 479.4� 13.1% 100.0% 100.0% Purchases (232.7) (217.8) ( 6.8)% ( 42.9)% ( 45.4)% Labor (80.2) (78.3) ( 2.4)% ( 14.8)% ( 16.3)% Third-party Manufacturers (15.4) (18.2) 15.4% ( 2.8)% ( 3.8)% Manufacturing Costs (24.4) (24.7) 1.2% ( 4.5)% ( 5.2)% Inventories, net (3.3) 15.0� ( 122.0)% ( 0.6)% 3.1% Cost of Sales (356.0) (324.0) ( 9.9)% ( 65.6)% ( 67.6)% Gross Profit 186.4� 155.4� 19.9% 34.4% 32.4% Selling Expenses (137.3) (133.7) ( 2.7)% ( 25.3)% ( 27.9)% General and Administrative Expenses (29.2) (31.0) 5.8% ( 5.4)% ( 6.5)% Operating Income (Loss) 19.9� (9.3) 314.0% 3.7% ( 1.9)% Interest Income, net 0.8� 0.0� 0.1% 0.0% Foreign Exchange, net (2.0) (3.9) ( 0.4)% ( 0.8)% Other Income, net 4.9� (1.7) 0.9% ( 0.4)% Earnings (Losses) before taxes and minority interest 23.6� (14.9) 258.4% 4.4% ( 3.1)% Income taxes (6.1) 0.9� ( 1.1)% 0.2% Earnings (Losses) before minority interest 17.5� (14.0) 225.0% 3.2% ( 2.9)% Minority Interest 0.0� (0.1) 0.0% 0.0% Net Earnings (Losses) 17.5� (13.9) 225.9% 3.2% ( 2.9)% Earnings (Losses) Per Share 0.32� (0.25) � � � Average Number of Shares Outstanding* 54,738,538� 54,681,628� � � � (*) Net of shares repurchased � � � � � � � � � � � � Key Figures in U.S. dollars (millions) Nine months ended on � � � September 30, 2006 � � September 30, 2005 � � Total Net Sales 675.6� 605.4� Gross Profit 232.2� 196.2� Operating Income (Loss) 24.8� (11.7) Net Earnings (Losses) 21.8� (17.6) Earnings (Losses) per Share 0.40� (0.32) Average exchange rate (U.S. dollar per Euro) � 1.2455� � � � 1.2628� � � GEOGRAPHIC BREAKDOWN � � � � � � � � � � � � Sales* Seat Units Three months ended on % Over Three months ended on % Over � 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 (Under) Americas 60.1� 59.3� 1.3% 357,752� 326,633� 9.5% % of total 42.3% 45.5% 52.0% 52.2% Europe 68.8� 61.4� 12.1% 274,427� 261,848� 4.8% % of total 48.5% 47.0% 39.9% 41.9% Rest of the world 13.1� 9.8� 33.7% 55,392� 36,816� 50.5% % of total 9.2% 7.5% � 8.1% 5.9% � TOTAL 142.0� � 130.5� � 8.8% 687,571� � 625,297� � 10.0% * Expressed in millions of EUR � � � � � � � � � � � � � � BREAKDOWN BY COVERING � � � � � � � � � � � � Sales* Seat Units Three months ended on % Over Three months ended on % Over � 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 (Under) Leather 123.4� 110.5� 11.7% 582,950� 504,545� 15.5% % of total 86.9% 84.7% 84.8% 80.7% Fabric 18.6� 20.0� (7.0%) 104,621� 120,752� (13.4%) % of total 13.1% 15.3% 15.2% 19.3% Total � 142.0� � 130.5� � 8.8% 687,571� � 625,297� � 10.0% * (Expressed in millions of EUR) � � � � � � � � � � � � � � BREAKDOWN BY BRAND � � � � � � � � � � � � Sales* Seat Units Three months ended on % Over Three months ended on % Over � 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 (Under) Natuzzi 83.8� 81.5� 2.8% 316,702� 291,659� 8.6% % of total 59.0% 62.5% 46.1% 46.6% Italsofa 58.2� 49.0� 18.8% 370,869� 333,638� 11.2% % of total 41.0% 37.5% 53.9% 53.4% TOTAL 142.0� � 130.5� � 8.8% 687,571� � 625,297� � 10.0% * (Expressed in millions of EUR) GEOGRAPHIC BREAKDOWN � � � � � � � � � � � � Sales* Seat Units Nine months ended on % Over Nine months ended on % Over � 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 (Under) Americas 186.9� 176.8� 5.7% 1,036,001� 1,019,390� 1.6% % of total 38.4% 41.9% 46.3% 50.8% Europe 264.4� 216.4� 22.2% 1,055,359� 870,393� 21.3% % of total 54.4% 51.3% 47.2% 43.3% Rest of the world 34.8� 28.7� 21.3% 144,761� 118,325� 22.3% % of total 7.2% 6.8% � 6.5% 5.9% � TOTAL � 486.1� � 421.9� � 15.2% 2,236,121� � 2,008,108� � 11.4% * (Expressed in millions of EUR) � � � � � � � � � � � � � � BREAKDOWN BY COVERING � � � � � � � � � � � � Sales* Seat Units Nine months ended on % Over Nine months ended on % Over � 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 (Under) Leather 420.6� 351.6� 19.6% 1,874,148� 1,571,230� 19.3% % of total 86.5% 83.3% 83.8% 78.2% Fabric 65.5� 70.3� (6.8%) 361,973� 436,878� (17.1%) % of total 13.5% 16.7% 16.2% 21.8% Total � 486.1� � 421.9� � 15.2% 2,236,121� � 2,008,108� � 11.4% * (Expressed in millions of EUR) � � � � � � � � � � � � � � BREAKDOWN BY BRAND � � � � � � � � � � � � Sales* Seat Units Nine months ended on % Over Nine months ended on % Over � 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 (Under) Natuzzi 307.3� 284.5� 8.0% 1,107,774� 1,066,735� 3.8% % of total 63.2% 67.4% 49.5% 53.1% Italsofa 178.8� 137.4� 30.1% 1,128,347� 941,373� 19.9% % of total 36.8% 32.6% 50.5% 46.9% TOTAL � 486.1� � 421.9� � 15.2% 2,236,121� � 2,008,108� � 11.4% * (Expressed in millions of EUR) NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated Balance Sheet as of September 30, 2006 and December 31, 2005 (Expressed in millions of EUR) � � � 30-Sep-06 31-Dec-05 ASSETS Current Assets: Cash and cash equivalents 123.7� 89.7� Marketable debt securities 0.0� 0.0� Trade receivables, net 110.5� 123.6� Other receivables 42.0� 46.3� Inventories 112.3� 115.7� Unrealized foreign exchange gains 1.8� 0.0� Prepaid expenses and accrued income 2.6� 2.6� Deferred income taxes 9.0� 6.6� Total current assets 401.9� 384.5� Non-Current Assets: Net property, plant and equipment 250.1� 262.8� Treasury shares 0.0� 0.0� Other assets 17.2� 16.6� � Deferred income taxes 1.1� 1.1� TOTAL ASSETS 670.3� 665.0� LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term borrowings 4.1� 7.7� Current portion of long-term debt 1.2� 0.4� Accounts payable-trade 70.7� 73.5� Accounts payable-other 25.4� 24.2� Accounts payable shareholders for dividends 0.6� 0.6� Unrealized foreign exchange losses 0.0� 4.8� Income taxes 3.9� 2.9� Salaries, wages and related liabilities 21.1� 22.1� Total current liabilities 127.0� 136.2� Long-Term Liabilities: Employees� leaving entitlement 34.1� 32.3� Long-term debt 2.2� 3.6� Deferred income taxes 0.0� 0.0� Deferred income for capital grants 14.0� 14.8� � Other liabilities 5.8� 4.4� Minority Interest 0.7� 0.7� Shareholders� Equity: Share capital 54.7� 54.7� Reserves 42.3� 42.3� Additional paid-in capital 8.3� 8.3� Retained earnings 381.2� 367.7� Total shareholders� equity 486.5� 473.0� TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 670.3� 665.0� NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows as of September 30, 2006 and 2005 (Expressed in millions of EUR) 30-Sep-06 30-Sep-05 Cash flows from operating activities: Net earnings (losses) 17.5� (13.9) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23.1� 21.9� Employees' leaving entitlement 1.8� 1.9� Deferred income taxes (2.3) (5.7) Minority interest 0.0� (0.1) (Gain) loss on disposal of assets 0.4� 0.6� Unrealized foreign exchange (losses) / gain (6.6) 12.1� Deferred income for capital grants (0.8) 0.0� Change in assets and liabilities: Receivables, net 13.1� 31.2� Inventories 3.5� (14.1) Prepaid expenses and accrued income (0.1) 0.4� Other assets 4.2� 3.3� Accounts payable (2.9) (21.2) Income taxes 1.0� (0.6) Salaries, wages and related liabilities (1.0) 1.0� Other liabilities 2.7� 0.1� � Total adjustments 36.1� 30.8� � NET CASH PROVIDED BY OPERATING ACTIVITIES 53.6� 16.9� � Cash flows from investing activities: Property, plant and equipment: Additions (11.8) (19.6) Disposals 0.2� 0.4� Government grants received 0.0� 0.0� Marketable debt securities: Proceeds from sales 0.0� 0.0� Purchase of business, net of cash acquired (3.1) (0.3) Disposal of business 0.0� 0.0� NET CASH USED IN INVESTING ACTIVITIES (14.7) (19.5) Cash flows from financing activities: Long term debt: Proceeds 0.0� 0.3� Repayments (0.6) (0.5) Short-term borrowings (3.6) 1.6� Dividends paid to shareholders 0.0� (3.8) Dividends paid to minority shareholders 0.0� (0.1) NET CASH USED IN FINANCING ACTIVITIES (4.2) (2.5) Effect of translation adjustments on cash (0.7) 3.5� INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 34.0� (1.6) Cash and cash equivalents, beginning of the year 89.7� 87.3� CASH AND CASH EQUIVALENTS, END OF THE PERIOD 123.7� 85.7� The Board of Directors of Natuzzi S.p.A. (NYSE: NTZ) ('Natuzzi' or 'the Company'), the world's leading manufacturer of leather-upholstered furniture, today announces the approval of the consolidated financial statements for the third quarter 2006. NET SALES Natuzzi third quarter 2006 total net sales were at EUR 158.5 million, or $ 202.0 million, up 7.7 percent as compared to third quarter 2005. During the first nine months of the year, total net sales increased by 13.1 percent with respect to the same period of 2005 at EUR 542.4 million, or $ 675.6 million. During the third quarter 2006, upholstery net sales were at EUR 142.0 million, or $ 180.9 million, up 8.8 percent over the third quarter of last year. During the same period, total seats sold increased by 10.0 percent. In the first nine months of 2006, the Company sold 2,236,121 seats, 11.4 percent more than the same comparable period of last year. Other sales (principally living room accessories, and raw materials produced by the Company and sold to third parties) decreased 1.2 percent to EUR 16.5 million, or $ 21.0 million, over the third quarter of last year. During the three months ended on September 30, 2006, net sales in the Americas increased by 1.3 percent over the third quarter 2005 at EUR 60.1 million, or $ 76.6 million, by 12.1 percent in Europe at EUR 68.8 million, or $ 87.7 million, by 33.7 percent in the rest of the world at EUR 13.1 million, or $ 16.7 million. In the third quarter 2006, two new stores were opened in China, whereas three stores were closed (one in Italy, one in UK and one in Switzerland), thus bringing the total number of stores to 278 as at September 30, 2006. In the same period, twelve galleries were opened, so that the total number of Natuzzi galleries was 560 as at September 30, 2006. Leather-upholstered furniture net sales were at EUR 123.4 million, or $ 157.2 million, up 11.7 percent over third quarter 2005, whereas fabric-upholstered net sales were down 7.0 percent at EUR 18.6 million, or $ 23.7 million. During the third quarter 2006, net sales for the Natuzzi branded products increased by 2.8 percent over the third quarter 2005 at EUR 83.8 million, or $ 106.8 million, and by 18.8 percent for the Italsofa products at EUR 58.2 million, or $ 74.2 million. GROSS PROFIT & OPERATING INCOME For the three months ended on September 30, 2006, gross profit increased at EUR 51.1 million, or $ 65.1 million, as compared to EUR 48.6 million, or $ 59.3 million, reported for the third quarter of the previous year. Gross profit margin slightly decreased at 32.2 percent, from 33.0 percent reported for the third quarter of 2005, mainly due to the unfavorable currency effect on upholstery net sales. The Company reported an operating loss of EUR 1.1 million, or $ 1.4 million, as compared to a break even in the third quarter 2005. FOREX & TAXES During the quarter ended on September 30, 2006, the Company reported a net foreign exchange loss of EUR 0.4 million, or a loss of $ 0.5 million, as compared to a net foreign exchange loss of EUR 0.9 million, or a net foreign exchange loss of $ 1.1 million, reported in the same comparable period of last year. For the third quarter of 2006, the Company had income tax credit of EUR 0.2 million, or $ 0.3 million, versus income taxes of EUR 0.5 million, or $ 0.6 million, reported last year. NET INCOME & EARNINGS PER SHARE For the third quarter 2006, the Company reported net income of EUR 0.8 million, or $ 1.0 million, versus net losses of EUR 2.0 million, or $ 2.4 million, reported in the same quarter of last year. Earning per share (ADR) was EUR 0.01, or $ 0.01, as compared to net loss per share of EUR 0.04, or $ 0.05, reported in third quarter 2005. For the first nine months, in 2006 the Company reported net earnings of EUR 17.5 million, or $ 21.8 million, versus net losses of EUR 13.9 million, or $ 17.6 million, for the same comparable period in 2005 CASH FLOW During the nine month period ended on September 30, 2006, net cash flow from operations increased at EUR 53.6 million, or $ 66.8 million, from EUR 16.9 million, or $ 21.3 million, generated for the same period in 2005. On per ADR basis, net operating cash flow was EUR 0.98, or $ 1.22, up from EUR 0.31, or $ 0.39, generated during the first nine months of 2005. Ernesto Greco, Chief Executive Officer of the Natuzzi Group, commented: "As in the prior quarter, the positive net sales performance has not been accompanied by a similar order flow. In fact, in the last few months the Group has been reporting a decrease in the order flow which could lead us to an adjustment of the production level. This decrease is mainly due to the general weak retail environment for home furnishing, confirmed at recent High Point furniture market, accompanied by persisting unfavorable currency conditions. Despite this, the Company expects to report for the full year 2006 an high single digit increase in revenues over year 2005 thanks to the existing order back log. In this challenging environment, we continue to invest in the Natuzzi brand. At the same time, we are focusing our efforts on an extensive process reengineering program that should improve the overall efficiency of the Group and on the reorganization of sales activities so to better envisage customers' needs and improve their satisfaction. Besides, we are finalizing a new exclusive spring collection for which we expect to obtain a successful reception from our customers at next January Cologne furniture fair. The combination of the above initiatives - concluded Greco - should better position the Group for future sales growth and profitability recovery". CONVERSION RATES The third quarter 2006 and 2005 dollar figures presented in this announcement were converted at an average noon buying rate of $1.2742 per EUR and $1.2196 per EUR, respectively. The nine months figures for 2006 and 2005 were converted at an average noon buying rate of $ 1.2455 per EUR and $ 1.2628 per EUR, respectively. MONTELEONE RESIGNED FROM THE BOARD OF DIRECTORS Gianluca Monteleone, Group Marketing Director until October 31st, 2006, resigned today from the Board of Directors. For the time being, he will not be replaced. THIRD QUARTER 2006 TELECONFERENCE Ernesto Greco, Chief Executive Officer, Filippo Simonetti, Chief Financial Officer, and Nicola Dell'Edera, Finance Director, will discuss financial results, followed by a question and answer session, in a teleconference at 10:00 a.m. New York time (3:00 p.m. London time - 4:00 p.m. Italian time) on Thursday November 16, 2006. ABOUT NATUZZI S.P.A. Founded in 1959 by Pasquale Natuzzi, Natuzzi S.p.A. designs and manufactures a broad collection of leather-upholstered residential furniture. Italy's largest furniture manufacturer, Natuzzi is the global leader in the leather segment, exporting its innovative, high-quality sofas and armchairs to 123 markets on 5 continents. Since 1990, Natuzzi has sold its furnishings in Italy through the popular Divani & Divani by Natuzzi chain of 125 stores, and 1 Natuzzi Store. Outside Italy, the Company sells to various furniture retailers, as well as through 152 licensed Divani & Divani by Natuzzi and Natuzzi Stores. Natuzzi S.p.A. was listed on the New York Stock Exchange on May 13, 1993. The Company is ISO 9001 and 14001 certified. FORWARD-LOOKING STATEMENTS Statements in this press release other than statements of historical fact are "forward-looking statements". Forward-looking statements are based on management's current expectations and beliefs and therefore you should not place undue reliance on them. These statements are subject to a number of risks and uncertainties, including risks that may not be subject to the Company's control, that could cause actual results to differ materially from those contained in any forward-looking statement. These risks include, but are not limited to, fluctuations in exchange rates, economic and weather factors affecting consumer spending, competitive and regulatory environment, as well as other political, economical and technological factors, and other risks identified from time to time in the Company's filings with the Securities and Exchange Commission, particularly in the Company's annual report on Form 20-F. Forward looking statements speak as of the date they were made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. -0- *T NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated Statement of Earnings for the quarters ended on September 30, 2006 and 2005 on the basis of Italian GAAP (Expressed in millions of EUR except per share data) ----------------------------------------------------- Three months ended on % Over Percentage of Sales 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 --------------- ----------- ----------- --------- --------- --------- Upholstery net sales 142.0 130.5 8.8% 89.6% 88.7% Other sales 16.5 16.7 ( 1.2)% 10.4% 11.3% Total Net Sales 158.5 147.2 7.7% 100.0% 100.0% --------------- ----------- ----------- --------- --------- --------- Purchases (69.6) (63.4) ( 9.8)% ( 43.9)% ( 43.1)% Labor (24.0) (22.1) ( 8.6)% ( 15.1)% ( 15.0)% Third-party Manufacturers (3.6) (5.2) 30.8% ( 2.3)% ( 3.5)% Manufacturing Costs (8.3) (8.5) 2.4% ( 5.2)% ( 5.8)% Inventories, net (1.9) 0.6 ( 416.7)% ( 1.2)% 0.4% Cost of Sales (107.4) (98.6) ( 8.9)% ( 67.8)% ( 67.0)% --------------- ----------- ----------- --------- --------- --------- Gross Profit 51.1 48.6 5.1% 32.2% 33.0% --------------- ----------- ----------- --------- --------- --------- Selling Expenses (42.9) (39.3) ( 9.2)% ( 27.1)% ( 26.7)% General and Administrative Expenses (9.3) (9.3) 0.0% ( 5.9)% ( 6.3)% Operating N.M. Income (Loss) (1.1) 0.0 ( 0.7)% 0.0% --------------- ----------- ----------- --------- --------- --------- Interest Income, net 0.3 0.0 0.2% 0.0% Foreign Exchange, net (0.4) (0.9) ( 0.3)% ( 0.6)% Other Income, net 1.7 (0.7) 1.1% ( 0.5)% Earnings (Losses) before taxes and minority interest 0.5 (1.6) 131.3% 0.3% ( 1.1)% --------------------------- ----------- --------- --------- --------- Income taxes 0.2 (0.5) 0.1% ( 0.3)% Earnings (Losses) before minority interest 0.7 (2.1) 133.3% 0.4% ( 1.4)% --------------------------- ----------- --------- --------- --------- Minority Interest (0.1) (0.1) ( 0.1)% ( 0.1)% Net Earnings (Losses) 0.8 (2.0) 140.0% 0.5% ( 1.4)% --------------- ----------- ----------- --------- --------- --------- Earnings (Losses) Per Share 0.01 (0.04) --------------- ----------- ----------- --------- --------- --------- Average Number of Shares Outstanding* 54,738,538 54,681,628 --------------------------- ----------- --------- --------- --------- (*) Net of shares repurchased N.M. = Not meaningful --------------------------------------------------------------------- Key Figures in U.S. dollars (millions) Three months ended on September September 30, 2006 30, 2005 --------------------------- --------------------- ------------------- Total Net Sales 202.0 179.5 Gross Profit 65.1 59.3 Operating Income (Loss) (1.4) 0.0 Net Earnings (Losses) 1.0 (2.4) Earnings (Losses) per Share 0.01 (0.05) Average exchange rate (U.S. dollar per Euro) 1.2742 1.2196 --------------------------------------------------------------------- *T -0- *T NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated Statement of Earnings for nine months ended on September 30, 2006 and 2005 on the basis of Italian GAAP (Expressed in millions of EUR except per share data) ----------------------------------------------------- Nine months ended on % Over Percentage of Sales 30-Sep-06 30-Sep-05 (Under) 30-Sep-06 30-Sep-05 --------------- ----------- ----------- --------- --------- --------- Upholstery net sales 486.1 421.9 15.2% 89.6% 88.0% Other sales 56.3 57.5 ( 2.1)% 10.4% 12.0% Total Net Sales 542.4 479.4 13.1% 100.0% 100.0% --------------- ----------- ----------- --------- --------- --------- Purchases (232.7) (217.8) ( 6.8)% ( 42.9)% ( 45.4)% Labor (80.2) (78.3) ( 2.4)% ( 14.8)% ( 16.3)% Third-party Manufacturers (15.4) (18.2) 15.4% ( 2.8)% ( 3.8)% Manufacturing Costs (24.4) (24.7) 1.2% ( 4.5)% ( 5.2)% Inventories, net (3.3) 15.0 ( 122.0)% ( 0.6)% 3.1% Cost of Sales (356.0) (324.0) ( 9.9)% ( 65.6)% ( 67.6)% --------------- ----------- ----------- --------- --------- --------- Gross Profit 186.4 155.4 19.9% 34.4% 32.4% --------------- ----------- ----------- --------- --------- --------- Selling Expenses (137.3) (133.7) ( 2.7)% ( 25.3)% ( 27.9)% General and Administrative Expenses (29.2) (31.0) 5.8% ( 5.4)% ( 6.5)% Operating Income (Loss) 19.9 (9.3) 314.0% 3.7% ( 1.9)% --------------- ----------- ----------- --------- --------- --------- Interest Income, net 0.8 0.0 0.1% 0.0% Foreign Exchange, net (2.0) (3.9) ( 0.4)% ( 0.8)% Other Income, net 4.9 (1.7) 0.9% ( 0.4)% Earnings (Losses) before taxes and minority interest 23.6 (14.9) 258.4% 4.4% ( 3.1)% --------------------------- ----------- --------- --------- --------- Income taxes (6.1) 0.9 ( 1.1)% 0.2% Earnings (Losses) before minority interest 17.5 (14.0) 225.0% 3.2% ( 2.9)% --------------------------- ----------- --------- --------- --------- Minority Interest 0.0 (0.1) 0.0% 0.0% Net Earnings (Losses) 17.5 (13.9) 225.9% 3.2% ( 2.9)% --------------- ----------- ----------- --------- --------- --------- Earnings (Losses) Per Share 0.32 (0.25) --------------- ----------- ----------- --------- --------- --------- Average Number of Shares Outstanding* 54,738,538 54,681,628 --------------------------- ----------- --------- --------- --------- (*) Net of shares repurchased --------------------------------------------------------------------- Key Figures in U.S. dollars (millions) Nine months ended on September September 30, 2006 30, 2005 --------------------------- --------------------- ------------------- Total Net Sales 675.6 605.4 Gross Profit 232.2 196.2 Operating Income (Loss) 24.8 (11.7) Net Earnings (Losses) 21.8 (17.6) Earnings (Losses) per Share 0.40 (0.32) Average exchange rate (U.S. dollar per Euro) 1.2455 1.2628 --------------------------------------------------------------------- *T -0- *T GEOGRAPHIC BREAKDOWN --------- ----------------------- ------------------------------- Sales* Seat Units Three months Three months ended ended on % Over on % Over 30- 30- Sep- Sep- 06 05 (Under) 30-Sep-06 30-Sep-05 (Under) ====== ====== ====== ========= ========= ========== ========== Americas 60.1 59.3 1.3% 357,752 326,633 9.5% % of total 42.3% 45.5% 52.0% 52.2% Europe 68.8 61.4 12.1% 274,427 261,848 4.8% % of total 48.5% 47.0% 39.9% 41.9% Rest of the world 13.1 9.8 33.7% 55,392 36,816 50.5% % of total 9.2% 7.5% 8.1% 5.9% --------- ------ ------ --------- --------- ---------- ---------- TOTAL 142.0 130.5 8.8% 687,571 625,297 10.0% --------- ----------------------- ------------------------------- * Expressed in millions of EUR ---------- ----------------------- ------------------------------- BREAKDOWN BY COVERING --------- ----------------------- ------------------------------- Sales* Seat Units Three months Three months ended ended on % Over on % Over 30- 30- Sep- Sep- 06 05 (Under) 30-Sep-06 30-Sep-05 (Under) ====== ====== ====== ========= ========= ========== ========== Leather 123.4 110.5 11.7% 582,950 504,545 15.5% % of total 86.9% 84.7% 84.8% 80.7% Fabric 18.6 20.0 (7.0%) 104,621 120,752 (13.4%) % of total 13.1% 15.3% 15.2% 19.3% Total 142.0 130.5 8.8% 687,571 625,297 10.0% --------- ----------------------- ------------------------------- * (Expressed in millions of EUR) ---------- ----------------------- ------------------------------- BREAKDOWN BY BRAND --------- ----------------------- ------------------------------- Sales* Seat Units Three months Three months ended ended on % Over on % Over 30- 30- Sep- Sep- 06 05 (Under) 30-Sep-06 30-Sep-05 (Under) ====== ====== ====== ========= ========= ========== ========== Natuzzi 83.8 81.5 2.8% 316,702 291,659 8.6% % of total 59.0% 62.5% 46.1% 46.6% Italsofa 58.2 49.0 18.8% 370,869 333,638 11.2% % of total 41.0% 37.5% 53.9% 53.4% TOTAL 142.0 130.5 8.8% 687,571 625,297 10.0% --------- ----------------------- ------------------------------- * (Expressed in millions of EUR) *T -0- *T GEOGRAPHIC BREAKDOWN --------------------------------- ------------------------------- Sales* Seat Units Nine months % Over Nine months ended on % Over ended on 30- 30- Sep- Sep- 06 05 (Under) 30-Sep-06 30-Sep-05 (Under) ========== ====== ====== ======== ========== ========== ========= Americas 186.9 176.8 5.7% 1,036,001 1,019,390 1.6% % of total 38.4% 41.9% 46.3% 50.8% Europe 264.4 216.4 22.2% 1,055,359 870,393 21.3% % of total 54.4% 51.3% 47.2% 43.3% Rest of the world 34.8 28.7 21.3% 144,761 118,325 22.3% % of total 7.2% 6.8% 6.5% 5.9% ---------- ------ ------ -------- ---------- ---------- --------- TOTAL 486.1 421.9 15.2% 2,236,121 2,008,108 11.4% --------------------------------- ------------------------------- * (Expressed in millions of EUR) ---------------------------------- ------------------------------- BREAKDOWN BY COVERING --------------------------------- ------------------------------- Sales* Seat Units Nine months ended on % Over Nine months ended on % Over 30- 30- Sep- Sep- 06 05 (Under) 30-Sep-06 30-Sep-05 (Under) ========== ====== ====== ======== ========== ========== ========= Leather 420.6 351.6 19.6% 1,874,148 1,571,230 19.3% % of total 86.5% 83.3% 83.8% 78.2% Fabric 65.5 70.3 (6.8%) 361,973 436,878 (17.1%) % of total 13.5% 16.7% 16.2% 21.8% Total 486.1 421.9 15.2% 2,236,121 2,008,108 11.4% --------------------------------- ------------------------------- * (Expressed in millions of EUR) ---------------------------------- ------------------------------- BREAKDOWN BY BRAND --------------------------------- ------------------------------- Sales* Seat Units Nine months ended on % Over Nine months ended on % Over 30- 30- Sep- Sep- 06 05 (Under) 30-Sep-06 30-Sep-05 (Under) ========== ====== ====== ======== ========== ========== ========= Natuzzi 307.3 284.5 8.0% 1,107,774 1,066,735 3.8% % of total 63.2% 67.4% 49.5% 53.1% Italsofa 178.8 137.4 30.1% 1,128,347 941,373 19.9% % of total 36.8% 32.6% 50.5% 46.9% TOTAL 486.1 421.9 15.2% 2,236,121 2,008,108 11.4% --------------------------------- ------------------------------- * (Expressed in millions of EUR) *T -0- *T NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated Balance Sheet as of September 30, 2006 and December 31, 2005 (Expressed in millions of EUR) 30-Sep-06 31-Dec-05 ---------------------------------------- --------- --------- ASSETS Current Assets: Cash and cash equivalents 123.7 89.7 Marketable debt securities 0.0 0.0 Trade receivables, net 110.5 123.6 Other receivables 42.0 46.3 Inventories 112.3 115.7 Unrealized foreign exchange gains 1.8 0.0 Prepaid expenses and accrued income 2.6 2.6 Deferred income taxes 9.0 6.6 Total current assets 401.9 384.5 ---------------------------------------- --------- --------- Non-Current Assets: Net property, plant and equipment 250.1 262.8 Treasury shares 0.0 0.0 Other assets 17.2 16.6 Deferred income taxes 1.1 1.1 ---------------------------------------- --------- --------- TOTAL ASSETS 670.3 665.0 ---------------------------------------- --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term borrowings 4.1 7.7 Current portion of long-term debt 1.2 0.4 Accounts payable-trade 70.7 73.5 Accounts payable-other 25.4 24.2 Accounts payable shareholders for dividends 0.6 0.6 Unrealized foreign exchange losses 0.0 4.8 Income taxes 3.9 2.9 Salaries, wages and related liabilities 21.1 22.1 Total current liabilities 127.0 136.2 ---------------------------------------- --------- --------- Long-Term Liabilities: Employees' leaving entitlement 34.1 32.3 Long-term debt 2.2 3.6 Deferred income taxes 0.0 0.0 Deferred income for capital grants 14.0 14.8 Other liabilities 5.8 4.4 ---------------------------------------- --------- --------- Minority Interest 0.7 0.7 ---------------------------------------- --------- --------- Shareholders' Equity: Share capital 54.7 54.7 Reserves 42.3 42.3 Additional paid-in capital 8.3 8.3 Retained earnings 381.2 367.7 Total shareholders' equity 486.5 473.0 ---------------------------------------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 670.3 665.0 -------------------------------------------------- --------- *T -0- *T NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows as of September 30, 2006 and 2005 (Expressed in millions of EUR) 30-Sep-06 30-Sep-05 --------- --------- Cash flows from operating activities: Net earnings (losses) 17.5 (13.9) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23.1 21.9 Employees' leaving entitlement 1.8 1.9 Deferred income taxes (2.3) (5.7) Minority interest 0.0 (0.1) (Gain) loss on disposal of assets 0.4 0.6 Unrealized foreign exchange (losses) / gain (6.6) 12.1 Deferred income for capital grants (0.8) 0.0 Change in assets and liabilities: Receivables, net 13.1 31.2 Inventories 3.5 (14.1) Prepaid expenses and accrued income (0.1) 0.4 Other assets 4.2 3.3 Accounts payable (2.9) (21.2) Income taxes 1.0 (0.6) Salaries, wages and related liabilities (1.0) 1.0 Other liabilities 2.7 0.1 Total adjustments 36.1 30.8 NET CASH PROVIDED BY OPERATING ACTIVITIES 53.6 16.9 ------------------------------------------------ --------- --------- Cash flows from investing activities: Property, plant and equipment: Additions (11.8) (19.6) Disposals 0.2 0.4 Government grants received 0.0 0.0 Marketable debt securities: Proceeds from sales 0.0 0.0 Purchase of business, net of cash acquired (3.1) (0.3) Disposal of business 0.0 0.0 NET CASH USED IN INVESTING ACTIVITIES (14.7) (19.5) ------------------------------------------------ --------- --------- Cash flows from financing activities: Long term debt: Proceeds 0.0 0.3 Repayments (0.6) (0.5) Short-term borrowings (3.6) 1.6 Dividends paid to shareholders 0.0 (3.8) Dividends paid to minority shareholders 0.0 (0.1) NET CASH USED IN FINANCING ACTIVITIES (4.2) (2.5) ------------------------------------------------ --------- --------- Effect of translation adjustments on cash (0.7) 3.5 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 34.0 (1.6) ------------------------------------------------ --------- --------- Cash and cash equivalents, beginning of the year 89.7 87.3 CASH AND CASH EQUIVALENTS, END OF THE PERIOD 123.7 85.7 ------------------------------------------------ --------- --------- *T