- Q2 2018 OPERATING RESULTS AFFECTED
BY WEAK WHOLESALE BUSINESS ENVIRONMENT AND ADVERSE CURRENCY
MOVEMENTS
- COMPANY’S DIRECT RETAIL OPERATIONS
STILL IMPROVING ON A LIKE-FOR-LIKE BASIS. ADDITIONAL 3 DOS TO BE
OPENED BY THE END OF THE YEAR
- SG&A EXPENSES IN
REDUCTION
- PARTNERSHIP WITH KUKA TO EXPAND THE
RETAIL NETWORK IN CHINA JUST STARTED
The Board of Directors of Natuzzi S.p.A. (NYSE:NTZ) today
approved its second quarter and first half 2018 consolidated
financial results.
2018 Second Quarter financial
results
Consolidated net sales for the second quarter of 2018 – affected
by the poor order flow during March-April - were €108.0 million,
down 7.1% from €116.2 million in the same period of 2017. Under
constant exchange rates total net sales would have decreased by
3.4%.
The Company reported a quarterly net operating loss of €5.0
million versus a net operating loss of €4.5 million in the second
quarter of 2017. Under constant exchange rates, net operating
result would have been -€3.3 million. Net loss attributable to
Natuzzi S.p.A. and Subsidiaries for the period was €7.4 million,
from a net loss of €4.0 million in the same quarter of 2017.
2018 First half financial
results
Consolidated net sales for the first half of 2018 were
€225.7 million, down 2.7% from €232.1 million in 2017 same period,
mainly due to the generalized strengthening of the Euro versus
major currencies, USD in particular. Under constant exchange rates,
total net sales would have been €237.8 million, or up 2.4%.
Revenues generated by our core business (sales of sofas, beds
and furnishings) were €212.0 million, down 2.8% from €218.2 million
in last year same period (or up 2.7% under constant exchange
rates). Total upholstery net sales decreased by 5.3% at €191.9
million over the first six months of 2017 (or substantially flat
under constant exchange rates), partially offset by the 29.9%
increase in home furnishings sales (or up 36.9% excluding the
currency effect). Our home furnishing offering, representing 24.5%
of our Natuzzi Italia net sales, will continue to be an important
part of our branded strategy.
During the period, Natuzzi division sales (which includes
Natuzzi Italia, Natuzzi Editions and Divani&Divani by Natuzzi)
increased 1.0% at €162.3 million, affected by unfavorable currency
movements (they would have been up 7.0% under constant exchange
rates). Our low-end offering, Softaly, continues to suffer (-13.7%
at €49.7 million) due in particular to the persisting difficulties
in the North American market.
Retail division
During the first six months of 2018, sales generated by our
Retail division (a network of Directly Operated Stores and
concessions) were €30.8 million, up 13.3% over the same period of
last year (or +18.2% under constant exchange rates). The increase
in sales was mainly attributable to store openings in the last few
quarters but also to organic growth.
We reported positive results in the USA (+42.8% or +61.8% under
constant exchange rates), Spain (+10.8%) and Switzerland (+3.5%).
Sales in Italy were flat notwithstanding the closure of one DOS.
Sales from our UK-based retail network decreased (they were €3.6
million from €4.5 million) mainly due to the rationalization of our
network, having sold one DOS to an independent partner. The
increase in sales in the US was primarily due to the opening of new
stores and to the good performance of our Florida-based stores. Our
Mexican DOS are providing encouraging sales performance.
During the first six months of 2018, Natuzzi Italia retail net
sales were €20.8 million, up 23.7% from €16.8 million in last year
comparable period, whereas sales from Natuzzi Editions were €3.0
million (from €3.3 million), and sales from our Divani&Divani
by Natuzzi were €7.0 million, substantially flat in the period.
Direct retail sales represented 14.5% of our core business,
increasing from 12.5% in the first half of 2017.
As of June 30, 2018, there were 64 DOS, of which 37 operated
under the Natuzzi Italia name, 16 Divani&Divani by Natuzzi and
11 Natuzzi Editions. In addition, the Group directly operates 20
Natuzzi Italia concessions. On August 1st, 2018, the above
mentioned 11 Natuzzi Editions stores were transferred to the
Chinese partnership vehicle with KUKA Group.
The cost reduction plan, together with the new merchandising
offered and the increased level of productivity of our stores have
contributed to a gradual improvement in our operating results.
During the period, our retail network reported net losses of €0.3
million (at the store level), improving from net losses of €0.7
million in 2017 first six months.
The improvement of our retail network emerges also on a
Like-For-Like basis. Our same-store network reported total
sales of €25.1 million, increasing 2.2% from €24.6 million in 2017
comparable period. In the same period, the operating profit
improved to €0.8 million from €0.2 million.
We have completed the turnaround and the upgrade of our stores
located in Florida and Mexico. The 3 DOS that we recently opened in
USA (Philadelphia, Chicago and Los Angeles-Costa Mesa) are showing
encouraging results. The Group confirms the opening of additional 3
DOS by the end of the year, namely 2 in the USA and 1 in
France.
Natuzzi wholesale division
Sales from our Natuzzi wholesale division, that
distributes branded products through franchised operated stores,
were €131.5 million, down 1.5% from €133.4 million in the first
half of 2017. Under constant exchange rates, the Natuzzi wholesale
division would have increased by 4.7%.
Within the Natuzzi division, Natuzzi Italia franchised sales
increased by 6.4% at €53.8 million and Divani&Divani by Natuzzi
by 16.6% at €8.7 million. Natuzzi Editions franchised sales
decreased by 8.5% at €69.0 million mainly affected by adverse
currency movements in North America.
Softaly wholesale division
Sales from the Softaly wholesale business were €49.7 million,
down 13.7% from €57.5 million reported in 2017 first half.
For the period, Softaly reported a 5.6% increase in the EMEA
region and a 5.9% increase in the Asia-Pacific region, whereas it
is still suffering in the North American market (-38.9%).
The recently introduced tariffs will have an impact on retail
prices with consequences which are not quantifiable, yet. The
Company is now analyzing any action in order to mitigate those
impacts.
Gross margin
During the first half of 2018, the consolidated gross margin was
equal to 31.9% (or 33.6% at constant exchange rates), versus 30.7%
in 2017 first half (or 34.7% after excluding the accrual made last
year for legal risks).
The gross margin in the period was affected by unfavorable
currency movements and also by increasing prices in some raw
materials. In addition, we had an increase in labor cost that
passed from 17.8% in 2017 first half (net of the accrual made last
year), to 19.4% mainly due to additional costs incurred to respect
the delivery terms.
SG&A
“Other SG&A” expenses decreased both in absolute terms and
as a percentage of sales as compared to 2017 first half, passing
from €50.1 million (or 21.6% on sales) to €46.6 million (or 20.6%
as a percentage on sales), thanks to our cost-reduction program,
and partly favored by exchange rates.
We will concentrate our DOS expansion in those markets where we
already have a retail organization in place to favor the absorption
of fixed SG&A costs.
First-half 2018 net Results
During the first six months of 2018, the Group reported an
operating loss of €8.0 million compared to €14.7 million in the
same period of 2017.
Under constant exchange rates and excluding the accrual made
last year for legal risks, the Group would have reported a net
operating loss of €3.5 million for the first six months 2018,
versus a net operating loss of €5.4 million in 2017 same
period.
Group’s net losses attributable to Natuzzi S.p.A. and
Subsidiaries were €12.3 million during the first half of 2018
versus €14.7 million in the same period of 2017.
Chairman and CEO Pasquale Natuzzi commented: “As anticipated in
the previous quarterly press release, the difficult business
scenario in the first part of the year, coupled with unfavorable
currency movements, has negatively affected the second quarter of
the year.
At the same time, we continue to see our DOS network grow, not
only as a result of new openings, but also because of organic
growth, and this gives us further incentive to expand our retail
network especially in those markets having high potential, such as
USA, China and UK.
The transformation of our operations into a retail-oriented
Company continues: setting up an efficient Retail organization
covering important markets often requires times and resources, but
numbers start to support our choice.
We are pleased to have finalized the partnership with KUKA that
will allow Natuzzi to leverage on KUKA capabilities and strengths
for the Natuzzi expansion in Greater China and, at same time, will
let us to concentrate our efforts in North America and Europe.”
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 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 second quarter 2018 &
2017
on the basis of Italian GAAP
(expressed in millions Euro)
Three months ended on:
Change Percentage of Sales
30-Jun-18 30-Jun-17 %
30-Jun-18 30-Jun-17 Upholstery net
sales 92.0 101.6 -9.4% 85.2% 87.4% Furnishings net sales 9.7 7.4
30.6% 9.0% 6.4% Other sales 6.3 7.2 -12.4%
5.8% 6.2%
Total Net Sales 108.0
116.2 -7.1% 100.0%
100.0% Consumption (*) (46.1) (48.5) -5.0% -42.6%
-41.7% Labor (20.9) (20.5) 1.8% -19.4% -17.7% Industrial Costs
(5.6) (7.6) -25.8% -5.2% -6.5% of which: Depreciation, Amortization
(2.0) (2.4) -14.7% -1.9% -2.1%
Cost of Sales (72.6) (76.6)
-5.2% -67.2% -65.9%
Gross profit 35.4
39.7 -10.7% 32.8%
34.1% Selling Expenses (16.6)
(18.0) -8.1% -15.3% -15.5%
Transportation (10.5) (10.5) -0.1% -9.7% -9.0% Commissions (2.2)
(2.7) -17.2% -2.1% -2.3% Advertising (3.8) (4.8) -20.5% -3.6% -4.2%
Other Selling and G&A (23.9) (26.2)
-8.7% -22.1% -22.5% of which: Depreciation,
Amortization (1.0) (1.0) -0.3% -0.9% -0.8%
Operating income/(loss) (5.0)
(4.5) -4.6% -3.9%
Interest Income/(Costs), Net (1.1) (1.2) Foreign Exchange,
Net (1.5) 0.6 Other Income/(Cost), Net 1.7 1.7
Net Income/(loss) before
income taxes (6.0) (3.4)
-5.5% -3.0% Income taxes
(1.5) (0.6) -1.4% -0.6%
Net Income/(loss)
(7.5) (4.1) -6.9%
-3.5% (Net income)/loss attributable to
non-controlling interest 0.1 0.1
Net Income/(loss)
attributable to Natuzzi S.p.a. and Subsidiaries
(7.4) (4.0) -6.9%
-3.4%
Net income (loss) per
Ordinary Share (0.14) (0.07)
(*) Purchases plus
beginning stock minus final stock and leather processing
Natuzzi S.p.A. and Subsidiaries Unaudited
Consolidated Profit & Loss for the first six months of 2018
& 2017
on the basis of Italian GAAP
(expressed in millions Euro)
Six months ended on
Change Percentage of Sales
30-Jun-18 30-Jun-17 %
30-Jun-18 30-Jun-17 Upholstery net
sales 191.9 202.7 -5.3% 85.0% 87.3% Furnishings net sales 20.1 15.5
29.9% 8.9% 6.7% Other sales 13.8 13.9 -1.3%
6.1% 6.0%
Total Net Sales 225.7
232.1 -2.7% 100.0%
100.0% Consumption (*) (97.1) (94.6) 2.6% -43.0%
-40.8% Labor (43.8) (50.7) -13.6% -19.4% -21.8% Industrial Costs
(12.9) (15.6) -17.4% -5.7% -6.7% of which: Depreciation,
Amortization (4.1) (4.9) -15.7% -1.8%
-2.1%
Cost of Sales (153.8)
(160.9) -4.4% -68.1%
-69.3%
Gross profit 72.0
71.2 1.1% 31.9%
30.7% Selling Expenses (33.4)
(35.8) -6.6% -14.8% -15.4%
Transportation (21.6) (20.8) 3.6% -9.5% -9.0% Commissions (4.9)
(5.3) -7.7% -2.2% -2.3% Advertising (7.0) (9.7) -27.7% -3.1% -4.2%
Other Selling and G&A (46.6) (50.1)
-7.1% -20.6% -21.6% of which: Depreciation,
Amortization (1.9) (1.9) 1.0% -0.8% -0.8%
Operating income/(loss) (8.0)
(14.7) -3.6% -6.3%
Interest Income/(Costs), Net (2.4) (2.4) Foreign Exchange,
Net (2.3) 1.3 Other Income/(Cost), Net 2.3 1.7
Net Income/(loss) before
income taxes (10.4) (14.1)
-4.6% -6.1% Income taxes
(1.8) (0.9) -0.8% -0.4%
Net Income/(loss)
(12.2) (15.0)
-5.4% -6.5% (Net income)/loss
attributable to non-controlling interest (0.1) 0.4
Net Income/(loss) attributable to Natuzzi S.p.a. and
Subsidiaries (12.3) (14.7)
-5.4% -6.3%
Net
income (loss) per Ordinary Share (0.22)
(0.27) (*)
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-Jun-18
31-Dec-17 Current assets: Cash and cash
equivalents 36.1 55.0 Marketable debt securities 0.0 0.0 Trade
receivables, net 55.0 46.9 Other receivables 19.8 18.7 Inventories
77.8 80.3 Unrealized foreign exchange gains 0.0 0.3 Prepaid
expenses and accrued income 1.6 1.0 Deferred income taxes
0.7 0.6
Total current assets 191.1
202.9 Non-current assets: Net property,
plant and equipment 105.7 107.9 Other assets 5.5 5.5 Trade
receivables, net 0.0 0.0 Other non-current assets 36.4
1.5
Total non-current assets 147.6
114.9 TOTAL ASSETS 338.7
317.8 LIABILITIES AND SHAREHOLDERS'
EQUITY Current
liabilities: Bank overdrafts 21.6 19.7 Current portion of
long-term debt 6.1 4.8 Accounts payable-trade 73.7 76.0 Accounts
payable-other 66.0 29.8 Accounts payable-shareholders for dividends
0.0 0.0 Unrealized foreign exchange losses 1.0 0.3 Income taxes 1.5
1.3 Deferred income taxes 0.0 0.0 Salaries, wages and related
liabilities 17.6 15.7
Total current
liabilities 187.5 147.7
Long-term liabilities: Employees' leaving entitlement 17.2
17.2 Long-term debt 17.4 20.9 Deferred income taxes - long term 0.0
0.0 Deferred income for capital grants 7.0 6.8 Other liabilities
13.0 16.7
Total long-term liabilities
54.6 61.6
Minority interest 1.8 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
28.5 40.1
Total shareholders' equity
94.9 106.4 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 338.7 317.8
Unaudited Consolidated Statements of Cash
Flows (Expressed in millions of Euro)
30-Jun-18
31-Dec-17 Cash flows from operating
activities: Net result (12.2) (31.9)
Adjustments to
reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization 6.0 12.8 Other non monetary costs
(revenues) 1.2 (2.7) One-time termination benefit accruals 0.0 0.0
Receivables, net (9.3) 10.4 Inventories 2.4 (3.2) Accounts payable
(1.9) 10.1 Other changes in assets and liabilities (0.5) 7.8 One
time termination benefit payment (1.2) (8.3)
Total
adjustments (3.2) 26.9
Net cash generated/(used) by operating
activities (15.4) (4.9)
Cash flows from investing activities: Property, plant and
equipment: Additions (3.2) (6.6) Disposals (0.0) (0.1) 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 0.0 0.0
Net cash generated/(used) by in investing
activities (3.5) (11.7)
Cash flows from financing activities: Long-term debt:
Proceeds 0.0 12.5 Repayments (2.2) (4.7) Bank overdrafts 1.9
1.5
Net cash generated/(used) by financing activities
(0.3) 9.3
Effect of translation adjustments on cash
0.3 (2.6)
Increase (decrease) in cash and cash equivalents
(18.9) (9.9)
Cash and cash equivalents, beginning of the year
55.0 65.0
Cash and cash equivalents, end of the period
36.1 55.0
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version on businesswire.com: https://www.businesswire.com/news/home/20180921005583/en/
NATUZZI INVESTOR RELATIONSPiero Direnzotel.
+39.080.8820.812pdirenzo@natuzzi.comorNATUZZI CORPORATE
COMMUNICATIONVito Basile (Press Office)tel.
+39.080.8820.676vbasile@natuzzi.com
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