Natuzzi Reports 2022 Third Quarter Results Versus 2021 in Challenging Market

November 30, 2022  by HFBusiness Staff in Business Strategy, Designer Weekly, Industry   

Third Quarter (3Q) 2022 invoiced sales amounted to €116.6 million, an increase of 14.5% versus 3Q 2021 and 32.4% versus pre-pandemic 3Q 2019. 3Q 2022 branded invoiced sales amounted to €103.7 million, an increase of 22.5% versus 3Q 2021 and 57.6% versus 3Q 2019.

Gross margin resulted of 37.7%, compared to 36.0% in 3Q 2021 and 28.7% in 3Q 2019, despite persisting high raw materials costs and the spike in energy costs.

Pasquale Natuzzi, chairman of the group commented, “We continue improving our operating model, as shown by the Ebit result of this quarter. However, the business environment for the whole economy and specifically for our industry remains challenging.”

“The high inflation is reducing the disposable income of our consumers. This, together with a perduring uncertainty on the geopolitical and economic outlook, is leading consumers to postpone their decision to buy furniture.”

 “These dynamics have caused a weaker demand starting from April. We remain committed to our long-term growth plan, but we need to acknowledge the unexpected conditions of the market we are facing. I have the highest confidence in our CEO and our team to overcome the short-term challenges posed by the market to our turnaround.”

Antonio Achille, CEO of the group commented: “In the third quarter, the work our team is doing to improve marginality, while continuing to support the growth of our revenues, started to become visible. We improved marginality by almost 10 percentage points vs 2019 notwithstanding the pressure of energy and other production costs on our P&L.”

2022 first nine months operating profit of €6.7 million, compares to €4.3 million in 2021 same period, that benefitted From €4.2 million one-off COVID-related measures. The operating profit of €6.7 million compares to a loss of (€19.5) million in 2019 first nine months.

Achille continued, “At the same time, we are not isolated from the negative market dynamics that affect consumers and retailers globally. Traffic in our stores has been decreasing since April and our retail partners, most notably in US, are still dealing with the extra stock they have built over the last months, which limits their ability to place new orders.”

“We shared the general hope that the Chinese Congress would have reviewed and lifted some of the zero-covid policies which instead continue being a main obstacle to our growth plan for the Region. The combination of these effects is causing a material reduction in the pace of new orders.”

3Q 2022 profit per ordinary share of €0.10, or €0.50 per American depositary receipt (ADR), versus a loss per ordinary share in 3Q 2021 of (€0.07), or (€0.35) per ADR, and a loss per ordinary share in 3Q 2019 of (€0.21), or (€1.05) Per ADR.

“Our commercial team is committed and working hard to sustain revenues in response of these market challenges. We are also evolving and strengthening our commercial organizations in our main geographies, including US and Europe, to better manage our existing clients and enrich the client portfolio with new selective introductions.”

“On the retail front, we continue investing to improve the organic growth of our stores reaching the level of retail excellence the Company aspires to, for the benefit of both our DOS and our franchising partners.”

“To accelerate this process, we recently hired a new senior manager, Mr. Michele Ciani, who will be responsible for the Retail Customer Experience for the Group. Michele brings a wealth of deep retail knowledge and more than 20 years of experience within multination furniture retailers to help them sharpening their brand & story visual identity in Europe and China.”

3Q 2022 operating profit of €4.1 million compares to an operating loss of (€0.4) million in 3Q 2021 and an operating loss of (€8.7) million In 3Q 2019.

Cash of €53.0 million as of Sept. 30 compares to €53.5 million as of Dec. 31, and €39.8 million as of Dec. 31.

“Despite the adverse market conditions, we continued our retail journey: during the first nine months of 2022, we added 55 Natuzzi franchise stores, of which 43 located in China. This brings the total number of stores to 708, of which 51 DOS directly managed by the Group in addition to 24 DOS directly managed by our JV in China.”

Store traffic and new orders continue the negative trend started in April and are below expectations given the challenges affecting the core markets where we operate.

“The price adjustments, enacted in the first part of the year to contrast the rising trend in the cost of transportation, energy, raw materials and production inputs, are now almost entirely factorized in the top line and that have helped us protect our marginality from the continue pressure of cost on our business.”

“In response to the tough market conditions, we have launched a set of actions to lower the costs of our G&A, tightly manage our working capital and protect our cash position,” Achille concluded.

Current exchange rate: $100 US = $96.59 Euros