- 1Q2020 GROUP’S SALES AND OPERATIONS AFFECTED BY
COVID-19
- GROSS MARGIN IMPROVING, DESPITE DECLINING SALES
- ACTIONS TAKEN TO REDUCE COSTS IN RESPONSE TO
COVID-19
- LIKE-FOR-LIKE DOS CHAIN STILL PROFITABLE AT STORE
LEVEL
The Board of Directors of Natuzzi S.p.A. (NYSE: NTZ1) (“Natuzzi”
or the “Company”) approved today its 2020 first quarter unaudited
consolidated financial results.
Update Of Covid-19 Impact On The
Group’s Operations
Consolidated net sales for the first quarter of 2020 were
affected by the COVID-19 pandemic, originated in China at the
beginning of the year and subsequently spread globally.
As stated in our press release dated February 24, 2020, the
Group’s Chinese plant, located in Shanghai and currently serving
the North American and Asian market, was closed for safety-related
reasons for two weeks, in addition to the Chinese New Year holiday
period. Operations in China started to resume only at the end of
February and gradually. For the same reasons, our points of sale in
China were closed during the same period.
In addition, as the contagion started to aggressively spread
outside of China, in March severe lockdown measures were introduced
in most of the countries in which we operate, leading to a
significant reduction in the Group’s and its customers’ activities
worldwide.
While Chinese economy has been the first to emerge from the
sanitary crisis, emergency still persists in areas such as the
Americas, whereas in Europe virus containment measures that were
adopted locally by different governments have started to be eased
only from the beginning of May.
Considering the current evolution of the contagion and the
uncertainties related to its duration and intensity globally,
coupled with the recent resurgence of the virus in China, it is
still difficult to determine the likely extent of the economic and
social effects of the pandemic on international markets and,
consequently, on the Group’s results for the rest of the current
year. For sure, 2q2020 consolidated sales resulted in a significant
reduction compared to the same period of 2019.
As a result of the COVID-19 outbreak, the Company remains
strongly focused on minimizing cash outlays, including, among
others, managing workforce costs, delaying capital expenditures and
reducing discretionary expenses.
First Quarter 2020
results
As a result of the above-mentioned effects of the pandemic,
consolidated net sales for the first quarter of 2020 were €82.5
million, down 22.4% from €106.2 million in 2019 same period.
Considering the Group’s core business only (upholstery,
accessories and home furnishings), net sales were €78.5 million,
down 22.4% compared to last year first quarter, as a result of the
43.7% decrease in Private Label sales and a 15.9% decrease in the
Natuzzi sales.
Other sales were €4.0 million.
The 15.9% decrease in Natuzzi branded revenues was the result of
the 22.8% decrease in the Americas, a 12.2% decrease in the EMEAI
and a 11.2% decrease in the Asia-Pacific region.
Natuzzi branded sales, generated by the direct retail (Directly
Operated Stores and concessions) and third-party operated points of
sale, were €65.2 million and represented 83.1% of the Group’s core
business, versus 76.7% in the first quarter of 2019.
The Group now directly operates 56 mono-brand DOS, of which 40
Natuzzi Italia, 14 Divani&Divani by Natuzzi stores and 2 new
Natuzzi Editions DOS in the UK. In addition, the Group directly
operates 11 Natuzzi Italia concessions in Mexico.
During the first three months of 2020, DOS sales were €14.8
million, down 10.0% versus the same period of 2019, mainly affected
by the closures of most of the points of sales as a result of the
lockdown measures.
On a like-for like basis, during the first quarter of 2020
revenues of the 50 DOS were down 10.6%, with a positive result at
store level notwithstanding the significant decline in sales.
The Natuzzi division also includes sales generated by
third-party operated mono-brand points of sales (Franchised
operated stores, or FOS, and galleries), whose sale were €49.5
million, down 17.1% compared to 2019 first quarter, as a result of
the 29.9% decrease in the Americas, a 9.3% decrease in the EMEAI
and a 11.2% decrease in the Asia-Pacific region.
Sales generated by the unbranded wholesale division, addressing
the mass-merchant distribution, were €13.3 million, down 43.7% from
€23.6 million in 2019 first quarter.
In light of the tariffs imposed by the US Administration on
goods imported from China, the Company has started to outsource in
Vietnam part of its Private Label production for some Key Accounts
in the USA. The Company continues to explore further external
industrial capacity in low-cost European Countries.
1Q2020 Gross margin
First quarter 2020 consolidated gross margin was 34.2%, up from
30.1% in 2019 same quarter, thanks to a favorable trend in raw
material prices, a better sales mix, notwithstanding decreasing
sales. In addition, the actions adopted by the Group contributed to
lowering the industrial and labor costs.
1Q2020 Selling, Administrative and other
income/expenses
Selling, Administrative and other operating income/expenses were
€33.2 million (or 40.2% on revenues), decreasing from €35.0 million
(or 32.9% on revenues) in 2019 first quarter, due to the
restructuring of our distribution network in Europe, but also as a
result of cost-cutting actions put in place in an effort to offset
the reduction in sales.
Selling expenses include also €1.0 million of non-cash goodwill
impairment charges related to our retail operations in Mexico.
1Q2020 results
The Group reported an operating loss of €4.9 million, which
includes the above-mentioned impairment, versus an operating loss
of €3.0 million in 2019 first quarter.
Net Profit deriving from the 49% share of the Chinese vehicle
was €0.4 million in 2020 first quarter.
Loss for the period was €7.8 million.
As of March 31, 2020, cash and cash equivalents in the statement
of financial position for the Group were €29.5 million from €39.8
million at the end of 2019, and the Group’s net financial position
before lease liabilities was negative at -€5.2 million, compared to
-€2.8 million at the end of 2019.
Net cash provided by operating activities less net investments
was positive at €1.8 million.
******************************
Chairman and CEO, Pasquale Natuzzi, commented: “What we are
living in is an unprecedented period of time, not only for our
industry, but for the global trade as a whole, as COVID-19 has
affected everyone’s lives, everywhere. Unfortunately, the current
sanitary emergency still remains a serious problem in many areas of
the world.
The pandemic has had a far-reaching impact over our business.
Before the outbreak of the virus, the branded business was growing
in line with our expectations. As the spreading of the virus became
global, we gradually closed all our stores and industrial
facilities resulting in a sudden, overnight, shutdown of the
activity, which has lasted for months, thus affecting the Group’s
overall operations. Being a global player, we were affected in an
inhomogeneous way, as we had to close part of our industrial and
commercial activities in different moments of the year: initially
in China, then in Europe and lastly in America, resulting in
fragmented interruptions of the business. At the same time, our
effort was concentrated to implement initiatives to manage and
preserve short-term liquidity to counterbalance the dramatic
decline in sales caused by the pandemic.
We began reopening our stores gradually from May, according to
local governments regulations, but some stores are still closed, as
it is the case in the USA or Brazil. In countries were restrictions
were lifted, customer demand has been moderately positive over the
last few weeks. We are closely monitoring consumer behavior as we
reopen more stores and adopt a flexible approach as we get through
this crisis.
China has confirmed to be the first country to come out of the
crisis. During these months, we have worked intensely with our
partners to be ready for the restart in this important market. We
recently organized our retail congress, also through digital
platform, and prepared a specific event in Shanghai to present, in
two flagships stores, our 2020 collection as a world preview.
Elsewhere, the situation is still evolving. While it is
impossible to predict the rate at which business will return to
pre-crisis levels, we have seen first signs of recovery in the
order flow during the last few weeks, with particular reference to
our retail business, but the overall picture is mixed. Some
markets, such as the North and South America, are still affected by
the virus containment measures in place, whereas other countries,
such as those located in Europe, are gradually returning to
normality, as almost all the restrictions have been lifted by the
relevant governments.
In addition, as the recent data suggests, fear for a second wave
of contagion in China, that could halt business again, is growing.
Therefore, as of today, uncertainty as for the recovery of the
global economy still remains.
Our industrial facilities, with the exception of Brazil, have
fully restarted their operations. In additions, after weeks of
severe restriction measures, negotiations to set up a new
industrial partnership in the Eastern Europe have restarted.
Management continues to be highly focused on taking actions to
mitigate the adverse effects generated by the COVID-19 and, in
particular, has been implementing stricter procedures to manage
liquidity and working capital needs, initiating measures to reduce
the cost of labor, deferring certain capital expenditures, and
cutting non-essential expenses.”
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).
1 The Company is noncompliant with quantitative/qualitative
continued NYSE listing standards (see
https://www.nyse.com/quote/XNYS:NTZ). For further information,
please see the press release issued by the Company on April 25,
2020.
Natuzzi S.p.A. and Subsidiaries Unaudited consolidated
statement of profit or loss for the first quarter of 2020 and
2019on the basis of IFRS -IAS (expressed in millions Euro)
Three months ended on Change Percentage of
Sales 31-Mar-20 31-Mar-19 %
31-Mar-20 31-Mar-19 Revenues
82.5
106.2
-22.4%
100.0%
100.0%
Cost of Sales
(54.2)
(74.2)
-26.9%
-65.8%
-69.9%
Gross profit
28.2
32.0
-11.7%
34.2%
30.1%
Other income
0.9
1.2
1.1%
1.1%
Selling Expenses
(25.0)
(27.5)
-9.3%
-30.3%
-25.9%
Administrative expenses
(8.3)
(8.5)
-2.3%
-10.1%
-8.0%
Impairment on trade receivables
(0.5)
0.0
-0.6%
0.0%
Other expenses
(0.3)
(0.1)
-0.4%
-0.1%
Operating profit/(loss)
(4.9)
(3.0)
-6.0%
-2.8%
Finance income
0.1
0.1
Finance costs
(1.6)
(2.5)
Net exchange rate gains/(losses)
(1.6)
0.5
Net finance income/(costs)
(3.2)
(1.8)
Share of profit/(loss) of equity-method investees
0.4
0.4
Profit/(Loss) before tax
(7.7)
(4.4)
-9.4%
-4.1%
Income tax expense
(0.1)
(0.2)
-0.1%
-0.2%
Profit/(Loss) for the period
(7.8)
(4.6)
-9.5%
-4.4%
Profit/(Loss) attributable to: Owners of the
Company
(7.7)
(4.6)
-9.4%
-4.4%
Non-controlling interests
(0.1)
0.0
Profit/(loss) per Ordinary Share
(0.14)
(0.08)
Natuzzi S.p.A. and Subsidiaries Unaudited consolidated
statements of financial position (condensed)on the basis of
IFRS-IAS(Expressed in millions of Euro)
31-Mar-20
31-Dec-19 ASSETS Non-current assets
205.4
212.5
Current assets
142.2
156.9
TOTAL ASSETS
347.6
369.4
EQUITY AND LIABILITIES Equity attributable to Owners
of the Company
95.2
103.1
Non-controlling interests
1.2
1.7
Non-current liabilities
109.9
112.6
Current liabilities
141.2
152.0
TOTAL EQUITY AND LIABILITIES
347.6
369.4
Natuzzi S.p.A. and Subsidiaries Unaudited consolidated
statements of cash flows (condensed) (Expressed in millions of
Euro)
31-Mar-20 31-Dec-19 Net cash
provided by (used in) operating activities
2.3
4.7
Net cash provided by (used in) investing activities
(0.5)
(3.3)
Net cash provided by (used in) financing activities
(12.0)
(24.2)
Increase (decrease) in cash and cash equivalents
(10.2)
(22.8)
Cash and cash equivalents, beginning of the year
37.8
60.4
Effect of movements in exchange rates on cash held
(0.2)
0.3
Cash and cash equivalents, end of the period
27.4
37.8
For the purpose of the statements of cash flow,
cash and cash equivalents comprise the following: (Expressed in
millions of Euro)
31-Mar-20 31-Dec-19 Cash and cash
equivalents in the statement of financial position
29.5
39.8
Bank overdrafts repayable on demand
(2.1)
(2.0)
Cash and cash equivalents in the statement of cash flows
27.4
37.8
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200626005473/en/
For information: 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
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