- NINE MONTHS NET PROFIT OF €27.0
MILLION, DERIVING FROM THE FINALIZATION OF THE AGREEMENT WITH
KUKA
- SALES AFFECTED BY WEAK WHOLESALE
BUSINESS AND UNFAVORABLE EXCHANGE RATES
- COMPANY’S DIRECT RETAIL OPERATIONS
CONTINUE TO IMPROVE
- NINE MONTHS OPERATING MARGINS
AFFECTED BY LOWER SALES AND RAW MATERIALS INCREASE, SLIGHTLY
IMPROVED IN Q3
- IFRS STANDARDS FIRST ADOPTION FROM
FULL YEAR 2018
The Board of Directors of Natuzzi S.p.A. today approved its 2018
third quarter and first nine months consolidated financial
results.
2018 First nine months
results
Consolidated net sales for the first nine months 2018
were €318.5 million, down 2.9% from 2017 same period. Under
constant exchange rates, they would have been €331.3 million, or up
1.0%.
Upholstery and furnishings total net sales were €298.4 million,
down 2.9% from last year same period, but up 1.3% under constant
exchange rates.
Upholstery net sales decreased by 5.2% at €270.4 million over
the first nine months of 2017 (or down 1.1% under constant exchange
rates), partially offset by the 27.0% increase in furnishings sales
(or up 31.8% excluding the currency effect).
Our furnishings offering, representing 24.1% of our Natuzzi
Italia net sales, continues to grow and represents a fundamental
part of our branded strategy.
Natuzzi
The Natuzzi division sales includes Natuzzi Italia,
Natuzzi Editions and Divani&Divani by Natuzzi.
Nine months net sales of this division were €227.5 million, flat
versus 2017 same period. Under constant exchange rates they would
have been up 4.4%.
Natuzzi Italia net sales increased by 9.5% over 2017 comparable
period (or by 14.1% under constant exchange rates) and today
represents 34.8% of the entire Group’s core business.
Natuzzi Direct retail
Following the execution of the partnership in China, the 11
Natuzzi Edition Directly Operated Stores (“DOS”) were transferred
and, consequently, are no longer considered. Therefore, the
following direct retail division numbers are displayed
accordingly.
Today, the Directly Operated points of sale are 76, of which 38
DOS Natuzzi Italia, 18 DOS Divani&Divani by Natuzzi and 20
Natuzzi Italia concessions.
During the first nine months of 2018, net sales generated by the
direct retail division were €40.3 million, up 19.0% over the same
period of last year (or +27.2% under constant exchange rates).
We reported positive sales numbers in the USA (+47.1%), Spain
(+11.2%) and Switzerland (+6.5%). Sales in Italy decreased by 1.9%
due to more promotional sales in third quarter. Sales from our
UK-based points of sale decreased by 22.1% mainly due to the
rationalization activity still in progress in that region. In 2019,
we will continue to restructure the UK direct retail business. We
understand that the concessions do not represent the UK ideal
business model.
The recently opened Natuzzi Italia stores in USA (Chicago, Costa
Mesa California, King of Prussia in Philadelphia, West Palm Beach)
have reached the break-even in the third quarter of the year.
At the same time, we have also completed the turnaround of the
recently acquired stores in Florida and Mexico.
The improvement of our retail network emerges also on a
Like-For-Like basis. Our same-store network reported total
sales of €31.3 million, increasing 4.5% from €29.9 million in 2017
comparable period. We will continue to fine-tune our retail
business model so to improve the overall profitability.
Natuzzi wholesale
Sales from our Natuzzi wholesale division were €187.2
million, down 3.3% from €193.6 million in the first nine months of
2017. Under constant exchange rates, the Natuzzi wholesale division
would have increased by 0.9%.
In 2019, we will focus on deploying the know-how and best
practices of our retail business model toward our franchised
business. The business model is based on store location in retail
parks, store size, merchandising adequate to the demographics of
the catchment area, marketing tools, retail ceremony
excellence.
Softaly
Sales in this low-end segment were €70.9 million, down 11.2%
from €79.9 million reported in 2017 same period, with a 7.0%
increase in the Asia-Pacific region, a 2.4% decrease in the EMEA
region and a 24.4% decrease in the Americas.
The business environment in which Softaly operates is
characterized by increasing pressure on prices.
Therefore, this situation is leading us to carefully reconsider
our overall approach to this part of the business.
Gross margin
During the first nine months of 2018, the consolidated gross
margin was equal to 31.6% (or 32.7% at constant exchange rates),
versus 30.5% in 2017 same period (or 33.3% after excluding the
accrual made last year for legal risks).
The gross margin in the period was affected by unfavorable
currency movements and increasing prices in some raw materials. In
this regard, the upward trend in consumption incidence on sales
experienced during 2017 has reverted during the first three
quarters of 2018.
In addition, we had an increase in labor cost that passed from
18.5% in 2017 comparable period (net of the accrual made last
year), to 19.6% also due to extra costs to respect the delivery
terms required by our customers.
SG&A
In spite of continued investments in the commercial
organization, “Other SG&A” expenses decreased both in absolute
terms and as a percentage of sales as compared to 2017 first nine
months, passing from €73.1 million (or 22.3% on sales) to €67.9
million (or 21.3% as a percentage on sales), mainly following our
cost-reduction program and partially favored by exchange rates.
First nine months 2018 net
Results
During the first nine months of 2018, the Group reported an
operating loss of €15.2 million compared to €23.3 million in the
same period of 2017.
As a result of the extraordinary income resulting from the
positive conclusion of the partnership agreement in China, Natuzzi
Group’s net profit was €27.0 million for 2018 nine months.
2018 Third Quarter
results
Consolidated net sales for the third quarter of 2018 were €92.7
million, down 3.2% from €95.8 million in the same period of
2017.
The Company reported a quarterly net operating loss of €7.2
million versus a net operating loss of €8.6 million in the third
quarter of 2017.
On July 27, 2018, the partnership agreement with KUKA group was
finalized. Consequently, the Company accounted extraordinary income
for a total of €52.5 million, of which:
i)
€44.8 million included in the “Financial
Income/(Cost), Net” item, as net consideration for:
a) the capital gain on disposal of shares from the Company to KUKA
group and b) the revaluation of the residual 49% of investment in
the Chinese vehicle due to the capital contribution made by KUKA
Group; ii) and €7.7 million included in the “Other Income/(Cost),
Net” item as a net capital gain on disposal of perpetual and
exclusive right to use the trademark in China.
Natuzzi S.p.A. and its Subsidiaries reported a net profit of
€39.3 million, from a net loss of €10.9 million in the same quarter
of 2017.
IFRS adoption
The Company announces that its Board of Directors has resolved
to voluntarily adopt International Financial Reporting Standards
(IFRS) for its consolidated financial statements from the fiscal
year ending December 31, 2018, in place of the Italian Generally
Accepted Accounting Principles (ITA-GAAP) currently adopted.
Chairman and CEO Pasquale Natuzzi commented: “Over the years, in
response to the generalized delocalization of production in
low-cost Countries, we have built an Italian lifestyle brand,
Natuzzi, that has allowed us to differentiate ourselves in the pure
price-based competitive arena. This has meant for us significant
investments in the product, marketing, organization and retail
structure, that have not been adequately returned, yet. However,
positive results are emerging from the execution of the retail and
branded strategy.
The recent deal with KUKA is a clear evidence that we have
created value.
Then, our high-end offering, Natuzzi Italia, continues to
grow.
Behind the DOS productivity improvement there are the activities
to continuously fine-tune the retail business model.
Now it is time to capitalize all the efforts made to build the
brand, the retail organization and the appropriate retail business
model. In 2019, we will focus on the deployment of such know-how
toward the franchised business, which still represents the majority
of our sales”.
Mr. Natuzzi continued: “Our unbranded business continues to
suffer. We have been making a specific screening on such business
with the aim of reducing the overall complexity, improving the
quality of sales and enhancing profitability from the current
level.
We are also aware that 2018 figures so far embody some
inefficiencies in the supply chain. We have identified the main
reasons for that and started a revision of the production and
logistic processes with the aim of recovering efficiency in our
plants.
Lastly, the current discussions surrounding the application of
tariffs on home furnishing products manufactured in China for the
US markets generates uncertainty. We do not know what the final
decision on tariffs will be like. Nevertheless, we are already
actively working on finding alternative solutions that leverage on
our international footprint.”
Mr. Natuzzi concluded: “In October and November 2018, we have
already improved our supply chain efficiency and we expect better
sales and results than third quarter. These improvements must
continue in 2019 where we will focus on supply chain efficiency
improvement, enhancement of retail and wholesale business
profitability along with a tight control of costs”.
“Natuzzi brand presentation” will be available on Monday,
December 3, 2018 from 07:00 a.m. U.S. Eastern Time (or 01:00 p.m.
Italian time) at the following link:
http://www.natuzzigroup.com/en-EN/ir/presentation.html
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS
Certain statements set forth 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, as
amended, 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. More
information about the potential factors that could affect the
Company’s business and financial results is included in the
Company’s filings with the Securities and Exchange Commission,
including the most recent Company’s 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.
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 player
in the furniture industry with an extensive manufacturing footprint
and a global retail network. Natuzzi is the Italian lifestyle
best-known brand in the upholstered furnishings sector worldwide
(Brand Awareness Monitoring Report - Ipsos 2016) and has been
listed on the New York Stock Exchange since 13 May 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 Profit & Loss for the third quarter 2018 &
2017
on the basis of Italian GAAP
(expressed in millions Euro)
Three months
ended on: Change Percentage of Sales
30-Sep-18 30-Sep-17 %
30-Sep-18 30-Sep-17
Upholstery net sales 78.5 82.6 -4.9% 84.6% 86.2% Furnishings
net sales 7.9 6.6 20.2% 8.5% 6.9% Other sales 6.4 6.6
-4.2% 6.9% 6.9%
Total Net
Sales 92.7 95.8 -3.2%
100.0% 100.0%
Consumption (*) (38.9) (40.8) -4.8% -41.9% -42.6% Labor (18.8)
(19.3) -2.8% -20.2% -20.1% Industrial Costs (6.4) (7.0) -7.7% -6.9%
-7.3% of which: Depreciation, Amortization (2.0)
(2.0) -1.6% -2.1% -2.1%
Cost
of Sales (64.1) (67.1)
-4.5% -69.1%
-70.1%
Gross profit
28.7 28.7 -0.1%
30.9% 29.9% Selling
Expenses (14.6) (14.3) 1.7% -15.7%
-14.9% Transportation (9.1) (8.7) 5.3% -9.8% -9.0%
Commissions (2.3) (1.4) 58.2% -2.5% -1.5% Advertising (3.2) (4.2)
-25.0% -3.4% -4.4%
Other Selling and G&A
(21.3) (22.9) -7.2% -23.0%
-24.0% of which: Depreciation, Amortization (0.9) (1.0)
-7.2% -1.0% -1.0%
Operating
income/(loss) (7.2) (8.6)
-7.8% -8.9%
Financial Income/(Cost), Net 43.8 (1.2) Foreign Exchange, Net 0.1
0.7 Other Income/(Cost), Net 7.7 0.0
Net Income/(loss)
before income taxes 44.4 (9.0)
47.9% -9.4%
Income taxes (5.2) (1.9) -5.7% -2.0%
Net Income/(loss) 39.2
(10.9) 42.2%
-11.4%
(Net income)/loss attributable
tonon-controlling interest
0.1 0.0
Net Income/(loss) attributable to
NatuzziS.p.a. and Subsidiaries
39.3 (10.9)
42.3% -11.4%
Net income (loss) per Ordinary Share
0.72 (0.20)
(*) Purchases plus beginning stock
minus final stock and leather processing
Natuzzi
S.p.A. and Subsidiaries Unaudited Consolidated Profit &
Loss for the first nine months of 2018 & 2017
on the basis of Italian GAAP
(expressed in millions Euro)
Nine months
ended on Change Percentage of Sales
30-Sep-18 30-Sep-17 %
30-Sep-18 30-Sep-17
Upholstery net sales 270.4 285.3 -5.2% 84.9% 87.0% Furnishings net
sales 28.0 22.0 27.0% 8.8% 6.7% Other sales 20.1 20.6
-2.2% 6.3% 6.3%
Total Net
Sales 318.5 327.9
-2.9% 100.0%
100.0% Consumption (*) (136.0) (135.5) 0.4% -42.7%
-41.3% Labor (62.5) (70.0) -10.6% -19.6% -21.3% Industrial Costs
(19.3) (22.6) -14.4% -6.1% -6.9% of which: Depreciation,
Amortization (6.1) (6.9) -11.6%
-1.9% -2.1%
Cost of Sales
(217.8) (228.0) -4.5%
-68.4% -69.5%
Gross profit 100.6
99.9 0.8% 31.6%
30.5% Selling Expenses (48.0)
(50.1) -4.2% -15.1% -15.3%
Transportation (30.7) (29.5) 4.1% -9.6% -9.0% Commissions (7.2)
(6.7) 6.3% -2.3% -2.1% Advertising (10.1) (13.9) -26.9% -3.2% -4.2%
Other Selling and G&A (67.9) (73.1)
-7.1% -21.3% -22.3% of which: Depreciation,
Amortization (2.8) (2.8) -1.8% -0.9% -0.9%
Operating income/(loss) (15.2)
(23.3) -4.8%
-7.1% Financial Income/(Cost), Net 41.4 (3.5)
Foreign Exchange, Net (2.2) 2.0 Other Income/(Cost), Net
10.0 1.7
Net Income/(loss) before income taxes
34.0 (23.2)
10.7% -7.1% Income taxes (7.0) (2.8)
-2.2% -0.9%
Net Income/(loss)
27.0 (26.0)
8.5% -7.9%
(Net income)/loss attributable
tonon-controlling interest
(0.0) 0.4
Net Income/(loss) attributable to
NatuzziS.p.a. and Subsidiaries
27.0 (25.6)
8.5% -7.8%
Net income (loss) per Ordinary Share 0.49
(0.47)
(*) Purchases plus beginning stock minus final
stock and leather processing
Natuzzi S.p.A. and
Subsidiaries Unaudited Consolidated Balance Sheets on the
basis of Italian GAAP(Expressed in millions of Euro)
ASSETS 30-Sep-18 31-Dec-17
Current assets: Cash and cash equivalents 53.6
55.0 Marketable debt securities 0.0 0.0 Trade receivables, net 55.4
46.9 Other receivables 19.1 18.7 Inventories, net 77.5 80.3
Unrealized foreign exchange gains 0.2 0.3 Prepaid expenses and
accrued income 1.3 1.0 Deferred income taxes 0.9 0.6
Total current assets 208.0 202.9
Non-current assets: Property plant and equipment, net
103.5 107.9 Intangible assets, net 1.8 2.0 Goodwill, net 3.4 3.5
Investment in affiliates 16.5 0.0 Trade receivables, net 0.0 0.0
Other non-current assets 1.2 1.4
Total non-current
assets 126.5 114.9 TOTAL
ASSETS 334.5 317.8
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Bank overdrafts 22.0 19.7
Current portion of long-term debt 11.3 4.8 Accounts payable-trade
64.7 76.0 Accounts payable-other 30.0 29.8 Accounts
payable-shareholders for dividends 0.1 0.0 Unrealized foreign
exchange losses 0.9 0.3 Income taxes 1.3 1.3 Deferred income taxes
0.0 0.0 Salaries, wages and related liabilities 17.2
15.7
Total current liabilities 147.5
147.7 Long-term liabilities: Employees'
leaving entitlement 17.1 17.2 Long-term debt 11.1 20.9 Deferred
income taxes 0.0 0.0 Deferred income for capital grants 7.4 6.8
Deferred income for use of Natuzzi trademark in Great China 7.3 0.0
Other liabilities 12.0 16.7
Total long-term liabilities 55.0
61.6 Minority
interest 1.6 2.0
Shareholders' equity: Share capital 54.9 54.9 Reserves 11.5
11.5 Additional paid-in capital 0.0 0.0 Retained earnings 64.0 40.1
Total shareholders'
equity 130.3 106.4 TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY 334.5
317.8 Unaudited Consolidated
Statements of Cash Flows (Expressed in millions of Euro)
30-Sep-18 31-Dec-17 Cash flows from
operating activities: Net result 27.0
(31.9)
Adjustments to
reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization 8.9 12.8 Other non monetary costs
(revenues) (59.3) (2.7) One-time termination benefit accruals 0.0
0.0 Receivables, net (10.6) 10.4 Inventories 1.9 (3.2) Accounts
payable (5.3) 10.1 Other changes in assets and liabilities 7.3 7.8
One time termination benefit payment (1.3) (8.3)
Total
adjustments (58.4) 26.9
Net cash generated/(used) by operating
activities (31.4) (4.9)
Cash flows from investing activities: Property, plant and
equipment: Additions (6.4) (6.6) Disposals 0.0 (0.1) Intangible
asset: use of Natuzzi trademark in Great China 13.4 0.0 Government
grants received 0.0 0.0 Dividends paid to minority interests (0.3)
(1.3) Purchase of business, net of cash acquired 0.0 (3.6)
Disposal/devaluation of business 24.5 0.0
Net cash generated/(used) by investing
activities 31.2 (11.7)
Cash flows from financing activities: Long-term debt:
Proceeds 0.0 12.5 Repayments (3.2) (4.7) Bank overdrafts 2.3
1.5
Net cash generated/(used) by financing activities
(1.0) 9.3
Effect of translation adjustments on cash
(0.3) (2.6)
Increase (decrease) in cash and cash equivalents
(1.5) (9.9)
Cash and cash equivalents, beginning of the year
55.0 65.0
Cash and cash equivalents, end of the period
53.6 55.0
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version on businesswire.com: https://www.businesswire.com/news/home/20181130005521/en/
FOR INFORMATION:NATUZZI INVESTOR RELATIONSPiero
Direnzo | tel. +39.080.8820.812 | pdirenzo@natuzzi.comNATUZZI
CORPORATE COMMUNICATIONVito Basile (Press Office) | tel.
+39.080.8820.676 | vbasile@natuzzi.com
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