Natuzzi S.p.A. Announces Second Quarter Financial Results

October 24, 2024  by Karen Parrish in Business Strategy, Industry   

SECOND QUARTER 2024 HIGHLIGHTS

• 2Q 2024 Overall invoiced sales amounted to €84.4 million, up 1% from €83.5 million in 2Q 2023.
• 2Q 2024 Branded sales were €76.4 million, up 2.5% compared to 2Q 2023 and up 7.3% compared to 2Q 2019. We completed our transition to a branded retail group: 2Q 2024 branded sales are 93.2% of total sales, from 91.9% in 2Q 2023 and 80.6% in 2Q 2019.
• 2Q 2024 DOS sales were €20.0 million, up 6.2% from 2Q 2023. In the US, DOS sales grew 32.8% from 2Q 2023 and 12.9% from strong 2Q 2022, confirming our commitment to US retail growth, chiefly for Natuzzi Italia.
• 2Q 2024 gross margin was 38.1%, compared to 36.4% in 2Q 2023, 31.4% in 2Q 2022, and 27.9% in the pre-covid 2Q 2019. 2Q 2024 gross margin is the highest since 2010 when the company benefited from a higher operating leverage. Excluding a €1.0 million accrual for workforce reductions, 2Q 2024 gross margin would have been 39.3%.
• 2Q 2024 operating loss of (€0.4) million, compared to break-even in 2Q 2023 and a loss of (€7.8) million in the pre-covid 2Q 2019. If we exclude €1.2 million of severance-related costs, 2Q 2024 would report €0.8 million of operating profit.
• 2Q 2024 net finance costs of (€2.0) million, compared to net finance costs of (€0.8) million in 2Q 2023, as a consequence of high interest rates.
• During 2Q 2024, we invested €2.1 million in capex, primarily for the dos located in the us and to upgrade our Italian factories.
• We continue executing our staff restructuring program to increase competitiveness. During 2Q 2024, 168 persons exited our group. These exits are partially offset by hires in strategic areas such as retail, marketing and merchandising. Since 2021, 860 persons exited our group, leading to ~20% headcount reduction. As a result, revenue per employee increased by 30%, even in a context of declining revenues.
• As of June 30, 2024, we held €28.2 million in cash, from €33.6 million as of December 31, 2023.
• As part of our strategic process to divest non-core assets in support of our long-term goals, namely retail expansion and restructuring, we approved the sale of a building in high point, North Carolina, for $12.1 million. Transaction terms further detailed below.

Pasquale Natuzzi, chairman of the group, commented, “The market we operate in remains challenging, as confirmed by industry data on our sector and more broadly on the consumer industry globally.  Our leadership team and the whole organization are working very diligently to protect our marginality and reduce the impact of these challenging market conditions on our business."

"We remain focused and committed to pursuing our strategic direction, with a strong emphasis on further strengthening our brand, merchandising, marketing retail capabilities and operations."

"The journey from being a manufacturer to becoming a globally recognized and respected brand, which I began around 20 years ago, is well underway. I am proud of how far we have come and excited about the results that lie ahead. I am confident that we will overcome this challenging market phase and achieve the success that our clients, partners, employees, and shareholders deserve.”

Antonio Achille, CEO of the Group, commented, “The second quarter closed above 2023, in a context where not only our sector but also most of the durable and consumer goods sectors are facing prolonged and challenging market conditions. While we remain fully convinced that our brands and retail deserve—and will achieve—higher sales, we see these results as a testament to our Company’s resilience and the strength of its Brand-Retail strategy."

"In my experience, during challenging market conditions, only brands anchored in genuine values—like Natuzzi—can endure and position themselves to fully realize their potential when more favorable conditions return."

KEY RESULTS: FIRST HALF OF 2024

During the first half of 2024, the Company reported the following results:

─ Total revenue of €168.9 million, a decrease of 0.4% compared to the first half of 2023.

─ We had a gross margin of 37.5%, compared to 36.0% and 29.1% reported in 2023 and 2019 first half, respectively. Excluding (€1.1) million of severance-related costs to reduce workforce at our Chinese, Romanian and Italian factories, 2024 first half gross margin would have been 38.2%. 

─ Depreciation and amortization for the period, which include also the depreciation charge of right-of-use assets related to the operating leases and accounted for in the cost of sales, selling and administrative expenses, amounted to €10.5 million, compared to €10.9 million and €11.5 million in the first half of 2023 and 2019, respectively. 10 2024 Second Quarter and First Half Results                                                                            

─ We had an operating profit of €0.2 million, compared to an operating loss of (€0.9) million in 2023 first half and an operating loss of (€10.8) million in 2019 first half. 2024 operating profit of €0.2 million includes (€1.4) million of non-recurring accruals related to the headcount reduction program, namely a (€0.3) million accounted for in the operating expenses, in addition to the already mentioned (€1.1) million of labor-related accrual accounted for in the cost of sales.

─ Net Finance costs were (€4.2) million, mainly as a result of finance costs of (€5.0) million, due to persisting high interest rates.  2024 Net Finance costs were the same as in first half of 2023 and compare to net finance costs of (€4.6) million in 2019 first half.

─ We had a loss after tax for the period of (€4.1) million, which compares to a loss after tax of (€3.7) million in 2023 first half and to a loss after tax of (€15.2) million for the first half of 2019.