Natuzzi S.p.A. Third Quarter and First Nine Months 2012 Financial Results

Natuzzi S.p.A. Third Quarter and First Nine Months 2012 Financial Results

SANTERAMO IN COLLE, Bari, Italy--(BUSINESS WIRE)-- The Board of Directors ofNatuzzi S.p.A. (NYS: NTZ) ("Natuzzi" or "the Company"), a leading company in the furnishings industry, today approved its consolidated financial results for the third quarter and first nine months ended September 30, 2012.

THIRD QUARTER 2012 HIGHLIGHTS

  • Total Net Sales at €111.7 million, from €114.4 million reported for third quarter 2011;
  • Industrial Margin at 35.3% on total net sales, improving from 29.6% reported in last year's comparable period;
  • Negative EBIT of €2.3 million, from a negative EBIT of €9.0 million reported for the third quarter of 2011.

FIRST NINE MONTHS 2012 HIGHLIGHTS

  • Total Net Sales at €342.3 million, 4.1% down from €356.8 million reported for the first nine months of last year;
  • Industrial Margin at 33.6% on total net sales, from 32.8% reported one year ago;
  • Negative EBIT of €10.3 million, as compared to a negative EBIT of €17.0 million reported for the first nine months of last year;
  • Positive Net Financial Position at €40.1 million as of September 30, 2012, as compared to €55.3 million as of December 31, 2011.

THIRD QUARTER 2012 FINANCIAL RESULTS

During the quarter ended September 30, 2012, total net sales (including raw materials and semi-finished products sold to third parties) amounted to €111.7 million, down 2.4% from €114.4 million reported in third quarter 2011.

Total upholstery net sales during the third quarter of 2012 were €97.5 million, decreasing 2.2% from €99.7 million in prior year comparable period. Net sales of Natuzzi Italia branded products were at €29.5 million, down by 13.7% compared to last year's third quarter, whereas sales of "Other Brands" increased by 3.8% at €68.0 million.

The breakdown by geographic allocation of total upholstery net sales was the following:

 3 quarter 2012 3 quarter 2011
Americas44.7%41.6%
Europe (ex Italy)32.9%34.4%
Italy6.2%8.2%
Rest of the World16.2%15.8%
 

The above table shows that the trend in sales within different regions, experienced in the first half of the year, has continued also during the third quarter of 2012. The weight of sales from Europe (included Italy) has further reduced as consequence of the extreme weakness of economic activity in that region and because of austerity-driven policy still in place in some EU Countries, affecting the families' purchasing power. The Americas region is confirmed as being the main area in terms of Group's sales.

The Industrial Margin during the quarter ended September 30, 2012 was equal to 35.3% on total net sales, up from 29.6% reported last year. Such improvement was the result of different factors such as the increase in the average price per seat and a more efficient production process.

During the third quarter 2012, the incidence of selling expenses (transportation, commissions to agents and advertising) on total net sales was 17.1% from 16.3% reported in 2011 third quarter. More specifically, the incidence of transportation costs on net sales was 10.9% in third quarter 2012 from 10.1% reported for 2011 third quarter, due to relatively more shipments towards the Americas and more sales of medium/low-end products (Private Label); the incidence of commissions to agents passed from 1.8% to 2.4% in third quarter 2012 as consequence of a higher weight in sales from the Americas. The percentage of advertising costs on total net sales decreased, passing from 4.4% in 2011 third quarter to 3.9% in the third quarter of 2012.

Other Selling, General & Administrative expenses decreased over 2011 third quarter both as percentage on net sales (from 21.2% in third quarter 2011 to 20.2% in third quarter 2012) and in Euro terms (from €24.2 million reported one year ago to €22.6 million in third quarter 2012) thanks in particular to the reorganization actions implemented at the Group level.

For the reasons highlighted above, during the third quarter of 2012 the Group reported a positive EBITDA equal to €1.8 million, versus a negative EBITDA of 4.1 million for the third quarter of 2011, and an operating loss of €2.3 million, from a negative EBIT of €9.0 million reported one year ago.

For the three months ended September 30, 2012 the Group reported a net loss of €5.2 million.

FIRST NINE MONTHS 2012 FINANCIAL RESULTS

Total net sales (including raw materials and semi-finished products sold to third parties) for the first nine months of 2012 were €342.3 million, down 4.1% over the first nine months of 2011.

Total upholstery net sales amounted to €298.9 million, down 3.8% from €310.7 million reported for the first three quarters of 2011. Net sales from Natuzzi Italia branded products totaled €102.9 million, down by 23.1% over last year comparable period, with Europe (included Italy) reporting a 27.8% decrease over last year. On the other hand, the medium/low-end products, under the "Other Brands" item, reported an average 10.8% increase over the prior year comparable period, thanks in particular to the good performance from the Americas region (+21.7%) and the "Rest of the World" region (+8.6%), and although disappointing sales from Europe (-4.7%).

According to a geographical breakdown of total net sales, during the first nine months of 2012 we highlight the positive result from the "Americas" region (+18.9% over 2011 same comparable period), due also to the effectiveness of the commercial actions in that region; in particular, it is worth being noted the performance from the USA (+16.3%), Canada (+23.4%) and Brazil (+98.0% at €4.6 million). Sales from Europe are still disappointing (-18.7% Italy included), being affected by the global economic slowdown and by the debt-related crisis in some Countries, even if sales from the UK are on the upside (+3.6% over last year same period). Sales from the "Rest of the World" region were at €44.2 million, down by 3.9% over the first nine months of 2011.

The Industrial Margin as percentage of total net sales was 33.6% during the first nine months of 2012, up from 32.8% reported for the same comparable period of 2011.

Selling expenses as percentage of total net sales were substantially unchanged, passing from 15.6% reported one year ago to 15.8% for the nine-month period ended September 30, 2012. In particular, transportation costs (at €34.0 million), passed form 9.4% in the first nine months of 2011 to 9.9% for the first three quarters of 2012; commissions paid to third party agents (at €7.5 million) increased from 1.8% reported last year to 2.2% for the first nine months of 2012. Advertising costs (at €12.4 million), decreased as percentage on total net sales, from 4.4% reported one year ago to 3.6% in the first nine months of 2012.

Other Selling, General & Administrative expenses decreased both in Euro terms (at €71.4 million for the first nine months of 2012, decreasing by €7.2 million from €78.6 million reported one year ago), and as percentage on total net sales (at 20.8% down from 22.0% reported one year ago).

For the first nine months of 2012, the Group reported a positive EBITDA equal to €2.6 million (versus a negative EBITDA of €2.1 million in prior year comparable period) and a negative EBIT equal to 10.3 million from a negative EBIT of €17.0 million reported one year ago.

For the first nine months of 2012 the Group reported Net Losses of €14.0 million.

BALANCE SHEET

The Group's Net Financial Position as of September 30, 2012 was positive and equal to €40.1 million.

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Pasquale Natuzzi, Chairman and CEO of the Natuzzi Group commented: "Also during the third quarter the world economy continued to grow at a modest pace, being affected not only by the slowdown in advanced economies but also in the emerging ones.

The Group performance during the quarter, consequently, turned out to be affected both by the persisting poor trend in sales from Europe, suffering from the effects of fiscal consolidation policies still in force in some Countries, and by the expanding of the global slow-down to other markets that are important for us.

We are not fully pleased with the quarterly operating result. However, the improving trend in EBIT as compared with one year ago gives us reasons for looking to the future with confidence. In fact, the efficiency recovery measures we've been implementing, together with a rigorous overhead cost-controlling plan, continue to give encouraging results and represent a clear indication we are on the right path towards the Group's profitability.

The difficult global scenario of the last few years has inexorably changed the way of making business, especially for global players as we are. We see, in fact, that consumers' preferences are changing, favouring mainly medium-low end products, and that the geographical distribution of the demand has been witnessing an increase in the weight of emerging markets. Our manufacturing and distributive organization, placed in different continents in a well-balanced way, is able to meet the consumers' needs, wherever they are, both in terms of products, and price-points.

We are well aware of the issues characterizing these hard times in particular. Still, we are cautiously confident that the commercial actions undertaken to consolidate the positive sales trend in the Americas and recover market shares in Europe, the efficiency recovery measures at Group level, and the strengthening plan of the distributive network especially in emerging markets such Brazil, Russia, India and China, will allow us to better tackle the current challenges arising from the markets.

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The Company will host a conference call on Monday November 19, 2012 at 10:00 a.m. U.S. Eastern time (4.00 p.m. Italian time or 3.00 p.m. UK time) to discuss third quarter 2012 financial results.

The dial-in phone numbers for the live conference call will be 1-888-438-5491 (toll-free) for persons calling from the U.S. or Canada, and 1-719-325-2435 for those calling from other countries.

A live web cast of the conference call will be available on line at http://www.natuzzi.com/ under the Investor Relations section.

A replay of the call will be available shortly after the end of the conference call starting from November 19, 2012 (at 1:00 pm US Eastern time) to December 19, 2012. To access the replay of the conference call, interested persons need to dial 1-877-870-5176 (toll-free) for calls from U.S. and Canada, and 1-858-384-5517 for calls from other countries. The access code for the replay is: 2491731.

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About Natuzzi S.p.A.

Founded in 1959 by Pasquale Natuzzi, Natuzzi S.p.A. designs and manufactures a broad collection of residential upholstered furniture. With consolidated revenues of EUR 486.4 million in 2011, Natuzzi is Italy's largest furniture manufacturer. The Natuzzi Group exports its innovative high-quality sofas and armchairs to 130 markets on five continents under separate brand names, Natuzzi, Italsofa, Natuzzi Editions (only for the North American market) /Leather Editions and Softaly. Cutting-edge design, superior Italian craftsmanship and advanced, vertically integrated manufacturing operations underpin the Company's market leadership. Natuzzi S.p.A. has been listed on the New York Stock Exchange since May 1993. The Company is ISO 9001 and 14001.

Natuzzi S.p.A. and Subsidiaries
Unaudited Consolidated Profit & Loss for the third quarter 2012 and 2011 on the basis of Italian GAAP
(expressed in millions Euro except per-share data)
           
 Three months ended on Change Percentage of Sales
  Sept. 30, 2012 Sept. 30, 2011 % Sept. 30, 2012 Sept. 30, 2011
  
Upholstery net sales97.599.7-2.2%87.3%87.2%
Other sales 14.2 14.7 -3.5% 12.7% 12.8%
Total Net Sales 111.7 114.4 -2.4% 100.0% 100.0%
 
Consumption (*)(48.5)(53.9)-10.0%-43.4%-47.1%
Labor(16.9)(18.9)-10.6%-15.1%-16.5%
Industrial Costs(6.9)(7.7)-10.9%-6.2%-6.7%
of which: Depreciation, Amortization (2.2) (2.4) -8.0% -2.0% -2.1%
Cost of Sales (72.3) (80.5) -10.2% -64.7% -70.4%
           
Industrial Margin 39.4 33.9 16.3% 35.3% 29.6%
 
Selling Expenses(19.1)(18.7)2.6%-17.1%-16.3%
Transportation(12.2)(11.6)5.2%-10.9%-10.1%
Commissions(2.6)(2.1)25.8%-2.4%-1.8%
Advertising(4.3)(5.0)-13.3%-3.9%-4.4%
 
Other Selling and G&A(22.6)(24.2)-6.6%-20.2%-21.2%
of which: Depreciation, Amortization(1.9)(2.4)-20.7%-1.7%-2.1%
           
EBITDA 1.8 (4.1)   1.6% -3.6%
           
EBIT (2.3) (9.0)   -2.1% -7.9%
 
Interest Income/(Costs), Net0.10.0
Foreign Exchange, Net(2.0)(0.9)
Other Income/(Cost), Net(0.3)(0.7)
           
Earning before Income Taxes (4.5) (10.6)   -4.1% -9.3%
 
Current taxes(0.7)0.3-0.6%0.2%
           
Net Result (5.2) (10.3)   -4.7% -9.0%
 
Minority interest0.00.0
           
Net Group Result (5.2) (10.3)   -4.7% -9.0%
           
Net Group Result per Share (0.09) (0.19)      
 
           
Key Figures in U.S. dollarsThree months ended onChangePercentage of Sales
(millions) Sept. 30, 2012 Sept. 30, 2011 % Sept. 30, 2012 Sept. 30, 2011
 
Total Net Sales139.7143.1-2.4%100.0%100.0%
Industrial Margin49.342.416.3%35.3%29.6%
EBIT(2.9)(11.2)-2.1%-7.9%
Net Group Result(6.5)(12.8)-4.7%-9.0%
Net Group Result per Share(0.12)(0.2)
 
Average exchange rate

(U.S.$ per 1€)

1.2510
 

(*) Purchases plus beginning stock minus final stock and leather processing

 UPHOLSTERY NET SALES BREAKDOWN
         

GEOGRAPHIC BREAKDOWN

NET SALES (million euro)SEATS SOLD
 
Three months ended onThree months ended on
Sept. 30, 2012 Sept. 30, 2011 ChangeSept. 30, 2012 Sept. 30, 2011 Change
 
Americas43.644.7%41.541.6%5.1%210,91452.2%223,05850.4%-5.4%
Natuzzi Italia3.53.6%4.04.0%-11.9%7,4161.9%10,9582.5%-32.3%
Other brands (*)40.141.1%37.537.6%6.9%203,49850.3%212,10047.9%-4.1%
 
Europe (ex Italy)32.132.9%34.334.4%-6.3%120,09729.7%132,97430.0%-9.7%
Natuzzi Italia12.312.6%14.214.3%-13.2%24,5266.1%28,8016.5%-14.8%
Other brands (*)19.820.3%20.120.1%-1.5%95,57123.6%104,17323.5%-8.3%
 
Italy (Natuzzi Italia)6.06.2%8.18.2%-25.8%19,2344.8%27,3766.2%-29.7%
 
Rest of the World15.816.2%15.815.8% Read Full Story

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