Natuzzi S.p.A. (NYSE: NTZ) Announces Consolidated First Quarter 2007 Financial Results
May 23 2007 - 5:06PM
Business Wire
The Board of Directors of Natuzzi S.p.A. (NYSE: NTZ) (�Natuzzi� or
�the Group�), the world�s leading manufacturer of
leather-upholstered furniture, today presented the consolidated
financial statements for the quarter ended on March 31, 2007. NET
SALES In the quarter ended on March 31, 2007, Natuzzi total net
sales decreased by 18.3 percent at EUR 153.8 million from EUR 188.2
million reported for the first quarter of 2006. During the same
quarter seats sold decreased by 17.0 percent with respect to one
year ago. During the first quarter of 2007 upholstery net sales
were at EUR 136.0 million, down 18.8 percent as compared to EUR
167.4 million reported for the same comparable period of last year.
Other sales (principally living-room accessories and raw material
produced by the Group and sold to third parties) decreased by 14.4
percent at EUR 17.8 million. In the three months ended on March 31,
2007, net sales in the Americas decreased on quarterly basis by
27.3 percent at EUR 46.4 million, by 14.4 percent in Europe at EUR
79.5 million, and by 5.6 percent at EUR 10.1 million in the rest of
the world. During the first three months of 2007, total net sales
to our chain of Divani & Divani by Natuzzi and Natuzzi Stores
totaled EUR 28.3 million, down by 17.3 percent with respect to the
first quarter of 2006. During the same period, six new Stores were
opened (1 in UK, 1 in Belgium, 1 in Israel, 1 in Australia, 1 in
China and 1 in the U.S.A.), whereas 1 store was closed in Italy,
thus bringing the total number of stores at 283 as of March 31,
2007. At the same date there were 547 Natuzzi Galleries worldwide.
Leather-upholstered furniture sales for the first quarter of 2007
were at EUR 120.0 million, decreasing by 16.3 percent with respect
to EUR 143.4 million reported one year ago, and fabric-upholstered
furniture sales were at EUR 16.0 million, down by 33.3 percent as
compared with the same period of 2006. Net sales for the Natuzzi
branded products decreased by 25.8 percent at EUR 81.0 million and
sales for the Italsofa products by 5.7 percent at EUR 55.0 million
over the first quarter 2006. GROSS & OPERATING RESULTS For the
three-month period ended on March 31, 2007, the Group reported a
gross profit of EUR 46.9 million, a 27.3 decrease from EUR 64.5
million in the first quarter of 2006. As a percentage of sales,
gross margin decreased at 30.5 percent from 34.3 percent reported
for the first quarter of last year mainly as a consequence of
reduced production volumes. In the same period the Group had an
operating loss of EUR 7.9 million, versus an operating income of
EUR 8.8 million in last year comparable period. FOREX AND TAXES For
the first quarter 2007, the Group reported a net foreign exchange
gain of EUR 0.5 million, versus a net foreign exchange loss of EUR
0.5 million in the first quarter of last year. During the same
quarter, the Group reported a deferred tax asset for EUR 1.1
million, as compared with income taxes of EUR 4.0 million for the
same period of 2006. NET RESULT AND GROUP EARNINGS PER COMPANY�S
SHARE For the quarter ended March 31, 2007, the Group reported net
losses of EUR 4.7 million, or EUR 0.09 losses per share (ADR),
versus net earnings of EUR 6.8 million, or EUR 0.12 earnings per
share, in the first quarter of 2006. Ernesto Greco, Chief Executive
Officer of the Group, commented �As previously anticipated, first
quarter 2007 turnover performance was affected by the challenging
business environment in all the major markets. In the US, the
business level was even more depressed, as confirmed by other major
players, mainly due to the low consumer confidence and to the sharp
decline in the house trade. In addition to that, the top line was
penalized by the minimal ending 2006 order backlog and by the
unfavorable Euro exchange rates against major currencies. This
challenging scenario still continues to have a negative effect on
our performance: Year-to-date total order flow is down high-single
digit as compared to the same period of last year and could affect
the sales performance in the coming months. Furthermore, over the
past months we have been experiencing also a price pressure in raw
materials, leather in particular, that contributed to the quarterly
gross margin decrease. Although the persistence of such tough
business conditions, we remain committed in investing in the
Natuzzi brand repositioning encouraged by the favorable acceptance
of our new models presented during last international Milan fair.
We are continuing the reorganization process of the retail
activities as well as our ongoing restructuring process of our
production to better match our cost structure with the pace of
incoming orders.� CONVERSION RATES The first quarter 2007 and 2006
dollar figures presented in this announcement were converted at an
average noon buying rate of $1.3109 per EUR and $1.2033 per EUR,
respectively. FIRST QUARTER 2007 TELECONFERENCE Pasquale Natuzzi,
Chairman of the Board, 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 May 24th, 2007. 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 124 stores, and 1 Natuzzi Store. Outside
Italy, the Group sells to various furniture retailers, as well as
through 158 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 Group 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 Group�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 Group�s filings with the
Securities and Exchange Commission, particularly in the Group�s
annual report on Form 20-F. Forward looking statements speak as of
the date they were made, and the Group 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 March 31, 2007 and
2006 on the basis of Italian GAAP (Expressed in millions of EUR
except per share data) � � � � � � � � � � Three months ended on %
Over Percent of Sales � 31-Mar-07 31-Mar-06 (Under) 31-Mar-07
31-Mar-06 Upholstery net sales 136.0� 167.4� (18.8)% 88.4% 88.9%
Other sales 17.8� 20.8� (14.4)% 11.6% 11.1% Total Net Sales 153.8�
188.2� (18.3)% 100.0% 100.0% Purchases (87.2) (79.0) (10.4)%
(56.7)% (42.0)% Labor (24.8) (27.2) 8.8% (16.1)% (14.5)%
Third-party Manufacturers (4.0) (5.6) 28.6% (2.6)% (3.0)%
Manufacturing Costs (7.7) (7.9) 2.5% (5.0)% (4.2)% Inventories, net
16.8� (4.0) 520.0% 10.9% (2.1)% Cost of Sales (106.9) (123.7) 13.6%
(69.5)% (65.7)% Gross Profit 46.9� 64.5� (27.3)% 30.5% 34.3%
Selling Expenses (43.4) (46.5) 6.7% (28.2)% (24.7)% General and
Administrative Expenses (11.4) (9.2) (23.9)% (7.4)% (4.9)%
Operating Income (Loss) (7.9) 8.8� (189.8)% (5.1)% 4.7% Interest
Income, net 0.5� 0.3� 0.3% 0.2% Foreign Exchange, net 0.5� (0.5)
0.3% (0.3)% Other Income, net 1.1� 2.2� 0.7% 1.2% Earnings (Losses)
before taxes and minority interest (5.8) 10.8� (153.7)% (3.8)% 5.7%
Income taxes 1.1� (4.0) 0.7% (2.1)% Earnings (Losses) before
minority interest (4.7) 6.8� (169.1)% (3.1)% 3.6% Minority Interest
0.0� 0.0� 0.0% 0.0% Net Earnings (Losses) (4.7) 6.8� (169.1)%
(3.1)% 3.6% Group Earnings (Losses) per Company's Share (0.09)
0.12� � � � Average Number of Shares Outstanding* 54,824,227�
54,738,538� � � � (*) Net of shares repurchased � � � � � � � � � �
� � Key Figures in U.S. dollars (millions) Three months ended on �
� � March 31, 2007 March 31, 2006 Total Net Sales 201.6� 226.5�
Gross Profit 61.5� 77.6� Operating Income (Loss) (10.4) 10.6� Net
Earnings (Losses) (6.2) 8.2� Group Earnings (Losses) per Company's
Share (0.12) 0.14� Average exchange rate (U.S. dollar per Euro) � �
1.3109� � � � 1.2033� � � GEOGRAPHIC BREAKDOWN � � � � � � � � � �
� � Sales* Seat Units Three months ended on % Over Three months
ended on % Over � � 31-Mar-07 � 31-Mar-06 � (Under) 31-Mar-07 �
31-Mar-06 � (Under) Americas 46.4� 63.8� (27.3%) 258,753� 324,922�
(20.4%) % of total 34.1% 38.1% 41.7% 43.5% Europe 79.5� 92.9�
(14.4%) 320,083� 379,159� (15.6%) % of total 58.5% 55.5% 51.6%
50.7% Rest of the world 10.1� 10.7� (5.6%) 41,266� 43,071� (4.2%) %
of total 7.4% � 6.4% � � 6.7% � 5.8% � � TOTAL 136.0� � 167.4� �
(18.8%) 620,102� � 747,152� � (17.0%) * Expressed in millions of
EUR � � � � � � � � � � � � � BREAKDOWN BY COVERING � � � � � � � �
� � � � Sales* Seat Units Three months ended on % Over Three months
ended on % Over � � 31-Mar-07 � 31-Mar-06 � (Under) 31-Mar-07 �
31-Mar-06 � (Under) Leather 120.0� 143.4� (16.3%) 535,756� 613,543�
(12.7%) % of total 88.2% 85.7% 86.4% 82.1% Fabric 16.0� 24.0�
(33.3%) 84,346� 133,609� (36.9%) % of total 11.8% 14.3% 13.6% 17.9%
Total 136.0� � 167.4� � (18.8%) 620,102� � 747,152� � (17.0%) *
(Expressed in millions of EUR) � � � � � � � � � � � � � BREAKDOWN
BY BRAND � � � � � � � � � � � � Sales* Seat Units Three months
ended on % Over Three months ended on % Over � 31-Mar-07 �
31-Mar-06 � (Under) 31-Mar-07 � 31-Mar-06 (Under) Natuzzi 81.0�
109.1� (25.8%) 285,349� 387,095� (26.3%) % of total 59.6% 65.2%
46.0% 51.8% Italsofa 55.0� 58.3� (5.7%) 334,753� 360,057� (7.0%) %
of total 40.4% 34.8% 54.0% 48.2% TOTAL 136.0� � 167.4� � (18.8%)
620,102� � 747,152� � (17.0%) * (Expressed in millions of EUR)
NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated Balance
Sheet as of�� March 31, 2007 and December 31, 2006��(Expressed in
millions of EUR) � � � � 31-Mar-07 � 31-Dec-06 ASSETS Current
Assets: Cash and cash equivalents 123.6� 128.1� Marketable debt
securities 0.0� 0.0� Trade receivables, net 108.3� 119.3� Other
receivables 47.5� 44.7� Inventories 117.2� 100.3� Unrealized
foreign exchange gains 4.1� 5.5� Prepaid expenses and accrued
income 4.0� 2.0� Deferred income taxes 10.4� 7.5� Total current
assets � 415.1� � 407.4� Non-Current Assets: Net property, plant
and equipment 246.3� 246.3� Treasury shares 0.0� 0.0� Other assets
18.0� 18.7� � Deferred income taxes � 2.3� � 2.3� TOTAL ASSETS �
681.7� � 674.7� LIABILITIES AND SHAREHOLDERS' EQUITY Current
Liabilities: Short-term borrowings 11.7� 3.8� Current portion of
long-term debt 0.3� 0.3� Accounts payable-trade 82.0� 79.5�
Accounts payable-other 23.5� 22.5� Accounts payable shareholders
for dividends 0.6� 0.6� Unrealized foreign exchange losses 0.0�
0.0� Income taxes 3.9� 4.6� Salaries, wages and related liabilities
21.9� 21.7� Total current liabilities � 143.9� � 133.0� Long-Term
Liabilities: Employees� leaving entitlement 35.1� 35.3� Long-term
debt 2.4� 2.4� Deferred income taxes 0.0� 0.0� Deferred income for
capital grants 13.8� 14.1� � Other liabilities � 10.6� � 10.5�
Minority Interest � 0.6� � 0.6� Shareholders� Equity: Share capital
54.8� 54.7� Reserves 42.3� 42.3� Additional paid-in capital 8.3�
8.3� Retained earnings 369.9� 373.5� Total shareholders� equity �
475.3� � 478.8� TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 681.7�
674.7� NATUZZI S.P.A. AND SUBSIDIARIES Unaudited Consolidated
Statement of Cash Flows as of March 31, 2007 and 2006 (Expressed in
millions of EUR) � 31-Mar-07 31-Mar-06 Cash flows from operating
activities: Net earnings (losses) (4.7) 6.8� Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7.2� 7.6� Employees' leaving
entitlement (0.2) 0.2� Deferred income taxes (3.0) (0.8) Minority
interest 0.0� 0.0� (Gain) loss on disposal of assets 0.0� 0.1�
Unrealized foreign exchange (losses) / gain 1.4� (5.4) Deferred
income for capital grants (0.3) (0.3) Change in assets and
liabilities: Receivables, net 10.9� (1.7) Inventories (16.8) 4.0�
Prepaid expenses and accrued income (2.0) (2.0) Other assets (2.8)
(0.5) Accounts payable 2.5� 13.4� Income taxes (0.7) 1.3� Salaries,
wages and related liabilities 0.2� (1.5) Other liabilities 1.6�
2.5� � Total adjustments (2.0) 16.9� � NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (6.7) 23.7� � Cash flows from investing
activities: Property, plant and equipment: Additions (6.0) (3.6)
Disposals 0.2� 0.0� Government grants received 0.0� 0.0� Marketable
debt securities: Proceeds from sales 0.0� 0.0� Purchase of
business, net of cash acquired 0.0� 0.0� Disposal of business 0.0�
0.0� NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (5.8) (3.6)
Cash flows from financing activities: Long term debt: Proceeds 0.0�
0.1� Repayments 0.0� 0.0� Short-term borrowings 7.9� 1.3� Dividends
paid to shareholders 0.0� 0.0� Dividends paid to minority
shareholders 0.0� 0.0� NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 7.9� 1.4� Effect of translation adjustments on cash 0.1�
0.1� INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4.5) 21.6�
Cash and cash equivalents, beginning of the year 128.1� 89.7� CASH
AND CASH EQUIVALENTS, END OF THE PERIOD 123.6� � 111.3�
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