• Positive Net Financial Position at €2.8 Million (from +€0.2 Million as of September 30, 2014), after €11 Million of Extraordinary Cash-out Following the Lay–off of 429 Italian Workers in 2014 Fourth Quarter

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 fourth quarter and full year 2014.

After the meeting of the Board of Directors, the Chief Executive Officer, Pasquale Natuzzi, commented: “Our fourth quarter 2014 results confirm the improving trend in the Group’s main indicators.

Total net sales during the quarter were equal to €138.6 million, up 12.6% from fourth quarter 2013.

The corrective measures introduced in the second half of 2014 as a means to recover efficiency in our industrial plants have allowed the Group to gradually improve quarterly industrial margins.

We have also been successful in lowering our fixed (other) SG&A expenses, which fell to 17.7% of net sales in the fourth quarter 2014 from 21.5% of net sales in the fourth quarter 2013.

As a result of higher net sales and the cost-cutting measures described above, quarterly operating results (-€8.7 million) recorded a 7.6% improvement over fourth quarter 2013.

This improvement in our overall financial results is even more significant if we consider the progression of the above-mentioned items over the last four quarters, as set forth in the following table: 

        1Q2014     2Q2014     3Q2014     4Q2014          
        Total net sales*     -11.2%     -1.2%     +8.2%     +12.6%          
        COGS**     -71.5%     -74.2%     -72.1%     -71.2%          
        Other SG&A**     -21.8%     -20.9%     -18.2%     -17.7%          
        EBIT**     -9.6%     -9.7%     -7.0%     -6.3%          

* quarterly percentage change in net sales over same quarter in 2013


** percentage of net sales

* quarterly percentage change in net sales over same quarter in 2013

** percentage of net sales

In 2014, turnover increased by 2.7% (to €461.4 million), yet EBITDA was equal to -€22.7 million from -€15.8 million. These results were mainly the consequence of two main factors:

1.inefficiencies experienced during the first part of last year within our Chinese plant following the introduction of radical changes to our manufacturing process. While these changes have led to steadily improving production trends through the first months of 2015, they contributed to an additional €5.2 million in cost of sales in 2014. This was due to the adoption of what we believe were certain one-off extraordinary measures that were necessary in order to meet agreed delivery times and not compromise our customer service.

2. low productivity in our Italian plants, due to the staffing of workers on a rotational basis as required by the October 2013 agreement. In March 2015, we entered into a new agreement, which has allowed us to stabilize our workforce, and that should result in improvements in productivity.

In the meantime, we have been carrying on with the innovation program as envisaged by the Group’s transformation plan:

i)the re-engineering of our best-selling models, was completed by the year end;

ii) we have reduced the number of models by 25% and the number of coverings by 38%;

iii) as for innovations in industrial processes, we have developed and tested in our experimental plant located in Matera a new integrated production cycle and production planning software. First tests results are very encouraging.

In 2014 sales activity was characterized by a positive development in late spring, as a result of the overall review of our product collections and their presentations in the main world fairs (Milan, Guangzhou, High Point).

2014 overall order intake was up +6.8% (€436.5 million in 2014 vs €408.8 million in 2013), thanks to the renewed product collection. It is quite important to notice that we have been able to consistently improve our average sell-in price.

From a geographical standpoint, whilst the North American market showed positive sales growth, European sales continued to slowdown. Asia Pacific presented mixed results with positive and consistent growth in China, also due to the opening of 49 new stores.

In 2014 we acquired a significant number of European key customers.

Following the recent trend in currency dynamics, and thanks to the Group’s industrial presence in Romania, Natuzzi can take further advantage within the European market versus Asian exporters.

We expect the improving trend in our industrial operations that has started during the second part of 2014 to continue into 2015.”

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