Natuzzi S.p.A., Italy’s largest furniture manufacturer and a leading manufacturer of leather-upholstered furniture, reported the following financial results for the third quarter and first nine months of 2011.
9 MONTHS 2011 CONSOLIDATED FINANCIAL RESULTS
- Net Loss of €3.6 million vs. a Net Loss of €9.6 million in 9M 2010
- Negative EBIT of €17.0 million, vs. a positive EBIT of €0.2 million in 9M 2010
- Gross profit was €117.2 million as compared to €145.9 million in 9M 2010
- Total Net Sales were €356.8 million, down 7.7% as compared to 9M 2010
3Q 2011 CONSOLIDATED FINANCIAL RESULTS
- Net Loss of €10.3 million vs. a Net Loss of €5.5 million in 3Q 2010
- Negative EBIT of €9.0 million, vs. a negative EBIT of €2.5 million in 3Q 2010
- Gross profit was €33.9 million as compared to €42.6 million in 3Q 2010
- Total Net Sales were €114.4 million, down 0.5% as compared to 3Q 2010
- Positive Net Financial Position of €58.8, with a good improvement as compared to December 31, 2010.
9 MONTHS 2011 CONSOLIDATED FINANCIAL RESULTS
Total Net Sales (including raw materials and semi-finished products sold to third parties) were €356.8 million, decreasing by 7.7% with respect to 2010.
Total upholstery sales totalled €310.7 million with a decline of 9.9% over the same period in 2010.
In particular, the Natuzzi brand was down 6.1%, while all other brands marked a decrease of 12.6%. Within the Natuzzi brand, the decline is mainly concentrated in Europe, while there is positive performance in the Rest of the World and a slight improved performance in Americas.
Sales of all other brands (-12.6%) were affected in particular by the decline in North America (-19.2%), due to the impact of the relocation of existing production sites in China to a new plant that generated delays in production, today returned to normal, but whose positive effects will be visible in subsequent quarters.The Rest of the world recorded, instead, still a positive performance of 10.5%.Other sales have registered a total increase of 10.0% mainly due to strong sales of accessories.Gross profit, 32.8% of sales compared to 37.7% in the first nine months of 2010, reflects the further increase in prices of raw materials and labour cost mainly in China and Romania.Transportation costs, showed a favourable decline in absolute terms of €3.8 million and in a percentage of sales that went from 9.7% in 2010 to 9.4% in the first nine months of 2011.
Commissions, as well as advertising costs, registered a reduction versus the first nine months of 2010, of €3.8 million (0.6% on sales).
Commercial and administrative costs (SG&A) allowed a significant improvement in absolute terms and amounted to €3.9 million as compared to the first nine months of 2010, but a slight worsening as a percentage on net sales (0.7%).
Both EBITDA and EBIT for the first nine months of 2011 were negative, €2.0 million and €17.0 million, respectively, as a result of lower sales and, increasing cost of goods sold, partly offset by commercial and administrative cost reductions.
Finally, the net consolidated result for the first nine months of 2011 recorded a loss amounted to €3.6 million as compared to a loss of €9.6 million in the first 9 months of 2010, thanks to extraordinary income deriving from the compensation obtained by the Chinese authorities for the relocation of the major factory of the Group located in China.
3Q 2011 CONSOLIDATED FINANCIAL RESULTS
Total Net Sales for €114.4 (including raw materials and semi-finished products sold to third parties) recorded a marginal decrease of 0.5% with respect to 3Q 2010.Total upholstery sales recorded a decline of 2.8% over the same period of 2010, but were almost completely offset by growth in other sales of 18.5% vs. the third quarter of 2010.
The break-down of upholstery net sales by geographic area was as follows: Europe (excluding Italy) 34.4%, the Americas 41.7%, Italy 8.1% and Rest of the World 15.8%, emphasizing a continuous and constant shifting of the Group revenues into the Rest of the World.Gross profit represented 29.6% on sales compared to 37.0% in the third quarter of 2010, mainly reflects the further increase in prices of raw materials and the growth of labour cost recorded in China and in Romania.Transportation costs have declined significantly registering a reduction in absolute term of €0.7 million.
The optimization processes in the of Commercial and Administrative areas allowed a further improvement in absolute terms amounted to €1.0 million compared to third quarter 2010. Consequently, the impact of SG&A on net sales went from 22.0% in the third quarter of 2010 to 21.1% in the third quarter of 2011.EBITDA amounted to a negative €4.2 million in the third quarter of 2011 versus a positive €3.4 million in the third quarter of 2010, and EBIT was negative by €9.0 million in the third quarter of 2011 compared to a negative margin of €2.5 million in the same period of last year.
Finally, the net result of the Group for the third quarter of 2011 recorded a loss amounted to €10.3 million compared to a loss of €5.5 million in the third quarter of 2010.
BALANCE SHEET
Net financial position rose from €45.6 million at December 31, 2010 to €58.8 million as at September 30, 2011.
Pasquale Natuzzi, Chairman and Chief Executive Officer of Natuzzi SpA, commented: "This third quarter of 2011 was characterized by uncertain and volatile markets. This condition negatively affects GDP growth in mature markets and in particular the demand for consumer durables, which in fact remains weak and volatile. These macroeconomic results coupled with factors pertaining to the Natuzzi Group, resulted in an overall drop in sales of 7.7% in the first nine months of 2011. In line with the macro-economic framework, mature markets suffered the most while emerging markets continued to show encouraging results. Specifically, the rest of the world has shown an overall +8.7% over the same period last year.
The Group’s financial performance was still negatively affected by delays in Chinese production impacting mainly North America, consequent to the relocation of the factory in China. This problem has now been overcome but results won’t be evident until the coming quarters.
We are aware of the continuing difficulties of the Western economies linked to sovereign debt in Europe and North America. However, commercial actions, taken to regain share in mature markets such as the important European and North American markets, the expansion in emerging markets of China, India and Brazil, and structural actions to increase internal efficiency, make us confident on a better scenarios for the near future of the Group".
About Natuzzi: 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 518.6 million in 2010. Natuzzi is Italy's largest furniture manufacturer. Natuzzi Group exports its innovative high-quality sofas and armchairs to 130 markets on five continents under two brands, Natuzzi and Italsofa. 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