SANTERAMO IN COLLE, Italy---The Board of Directors of Natuzzi S.p.A. (NYSE:NTZ) (“Natuzzi” or “the Company”) has approved its consolidated financial results for the first quarter of 2014.
“First quarter 2014 results represent a first check-point for monitoring the progress of the 2014-2016 Business Plan (the “Plan”
After the meeting of the board of directors, the Chief Executive Officer, Pasquale Natuzzi, commented:
“First quarter 2014 results represent a first check-point for monitoring the progress of the 2014-2016 Business Plan (the “Plan”), that was approved by the board of directors on February 28, 2014, as well as the effectiveness of the actions already undertaken.
Consolidated net sales in the period were equal to €98.4 million, down 11.2% from €110.7 million reported in the first quarter of 2013.
This reduction – largely anticipated by the Plan – is attributable principally to the following factors:
The negative impact from foreign currency movements that have eroded 3.2% of total net sales when translated into Euro;
The negative performance of some of the Group’s largest dealers located in the North America region, following the adverse weather conditions that occurred on the Atlantic coast and that have affected the first few months of the year;
Production delays, particularly in Italy and China. As for Italy, we reported a low level of productivity since we staffed our Italian plants with workers on rotation, in accordance with the agreement we entered into with the unions on October 10, 2013; as for China, we experienced a higher than expected level of turnover among workers after the Chinese New Year holiday period, consequently lowering the level of productivity for the Chinese plant.
It is worth highlighting that, notwithstanding the 11.2% reduction in revenue reported for the period, the Group’s industrial margin was substantially the same as last year, passing from 29.0% in 2013 first quarter to 28.5% in the first three months of 2014.
The consolidated EBIT was negative at -€9.4 million (compared to a negative EBIT of -€6.9 million last year), slightly below the operating result of -€8.8 million expected by the Plan for the period, and was the result of the following:
A €2.6 million loss related to the operating performance of the Group’s directly operated stores (DOS). This result was foreseen by the Plan and turned out to be better than first quarter last year by €0.9 million. The reverse in trend was due both to a significant increase in sales (an overall increase of 24.7% in the quarter versus last year same period, or an increase of 19.6% on a same-store sales basis) and also due to the closure of eight non-performing stores, as envisaged by the Plan;
A €1.4 million loss related to our operations in Brazil, this too was envisaged by the Plan, and improved by €0.3 million if compared to the same quarter in 2013;
The remaining operating loss pertains the Group’s industrial operations and the overhead cost structure. In this regard, the actions already undertaken aimed at recovering industrial efficiency have already shown that since last March – after two difficult initial months – a trend reversal has been in place, substantially in line with the Plan. In particular:
1) The restructuring of our Italian operations, according to the agreement entered into between the Company and unions on October 10, 2013, under the supervision of the Minister of Economic Development, is underway, with the contemplated closure of the plant in Ginosa, Italy, having been completed, the right-sizing in the number of our workforce and the end of staffing by rotation within the Italian plants;
2) On the product innovation side, an additional 35 models were re-engineered during the first three months of the year, and we expect to re-engineer a further 85 models by the end of 2014. At the end of the current year, we expect 90% of our production will be represented by models that will be manufactured on platforms.
3) On the industrial process-innovation side, we set up an additional 15 new moving lines during the first quarter of 2014. Within the end of this year we plan to complete a further 11 moving lines, thus bringing the total number of moving lines in all of the Group’s plants to 50, as contemplated in the Plan.
4) The start of the project execution for a centralized shared service structure, as envisaged by the Plan, designed to reduce back-office costs.
Cash used by operations and investments have reduced the Group’s net financial position from €28.5 million as of the end of 2013 to €21.1 million as of March 31, 2014, including a €1.4 million negative effect from foreign currency movements.
In consideration of this first and very important check point of the 2014-2016 business plan, we are now in the position to say that our progress for the restructuring of the Group’s operations is in line with the Plan, as is our project for reorganizing the Group’s commercial structure, for which we recently hired two important managers for the Americas and Western Europe markets.
Lastly, although the current order flow is not in line with our expectations, we perceive the first signals of a trend reversal following the positive feedback we have received on our new collections that were recently introduced at international fairs since the end of March. To sum up, we are cautiously optimistic about our reaching the targets included in the Plan.”.
About Natuzzi S.p.A.
Founded in 1959 by Pasquale Natuzzi, Natuzzi S.p.A. designs, manufactures and sells a broad collection of couches, armchairs, home furniture and home accessories. With consolidated revenues of €449.1 million in 2013, Natuzzi is Italy’s largest furniture house and the player with the greatest global reach in its sector, with eight manufacturing plants, twelve commercial offices and more than 1,200 points of sale worldwide. Ethics and social responsibility, innovation, industrial know-how and integrated management of its value chain represent the points of strength that have made the Natuzzi Group a market leader and established Natuzzi as the most recognized furniture brand in the world among consumers of luxury goods. Natuzzi S.p.A. has been listed on the New York Stock Exchange since May 1993. The Company is ISO 9001 and 14001 certified.
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