Natuzzi: Second Quarter and First Half 2014 Consolidated Financial Results

SANTERAMO IN COLLE, Italy--(BUSINESS WIRE)--

The Board of Directors of Natuzzi S.p.A. NTZ (“Natuzzi” or the “Company”) has approved its consolidated financial results for the second quarter and first half of 2014.

After the meeting of the Board of Directors, the Chief Executive Officer, Pasquale Natuzzi, commented:

“First semester results deliver two important messages about the progress of the 2014-2016 Transformation Plan: they confirm the validity of our overall marketing and distribution strategy, while highlighting the need to implement certain corrective measures within the Group's industrial operations which may result in slower implementation of the Plan than originally envisaged.

Notwithstanding encouraging high single-digit growth in year-to-date order flow, the performance of our industrial plants has fallen short of our expectations. Production delays in China and inefficiencies at the Italian plants – together with unfavorable currency movements that have affected our sales by 3.3% - have contributed to a decline in the Company's turnover to €211.1 million, a decrease of 6.1% compared to the first six months of 2013.

At the same time, we highlight a significant recovery in our sales during the second quarter of 2014. In fact, on a quarterly basis, second quarter turnover was down 1.2% (or up 1.7% at constant exchange rates), a 10% improvement from the 11.2% reduction reported in the first quarter of the year.

All of the above has negatively affected our industrial margin, which declined to 27.1% in the first half of 2014 compared to 29.2% in the first half of 2013.

The strengthening of the Euro against the US dollar, which led to a €1.6 million decline in first half operating results, and the increase in the cost of leather, which led to a €4 million increase in the cost of goods sold, also contributed to an operating loss of €20.4 million for the first half of 2014 (compared to an operating loss of €14.3 million for the first half of 2013). In this regard, we expect the recent weakening of the Euro against the US dollar and the increase in our price list since May to offset the increase in leather cost in the following quarters.

The execution of the other restructuring projects included in the 2014-2016 Transformation Plan is continuing on schedule, and we are further strengthening the Group's management team, including through two recent appointments within our commercial operations (Americas and Western Europe), and three new managers responsible for HR and Organization, Italian Operations and Quality, respectively.

In light of encouraging order flow, continuing improvements in our operations and the on-time execution of the other projects in the Transformation Plan, I believe we can confirm the long-term goals as reflected in the Plan.

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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 Natuzzi'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 Natuzzi's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 20-F for the year ended December 31, 2013. Natuzzi undertakes no obligation to update any of the forward-looking statements after the date of this press release.

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About Natuzzi S.p.A.

Founded in 1959 by Pasquale Natuzzi, Natuzzi S.p.A. designs, manufactures and sells a broad collection of couches, armchairs, home furniture and home accessories. With consolidated revenues of €449.1 million in 2013, Natuzzi is Italy's largest furniture house and the player with the greatest global reach in its sector, with eight manufacturing plants, twelve commercial offices and more than 1,200 points of sale worldwide. Ethics and social responsibility, innovation, industrial know-how and integrated management of its value chain represent the points of strength that have made the Natuzzi Group a market leader and established Natuzzi as the most recognized furniture brand in the world among consumers of luxury goods. Natuzzi S.p.A. has been listed on the New York Stock Exchange since May 1993. The Company is ISO 9001 and 14001 certified.

Natuzzi S.p.A. and Subsidiaries
Unaudited Consolidated Profit & Loss for the second quarter of 2014 & 2013 on the basis of Italian GAAP
(expressed in millions Euro, except per share amounts)
		Three months ended on				Change				Percentage of Sales
		30-Jun-14		30-Jun-13		%				30-Jun-14		30-Jun-13
Upholstery net sales		100.3		102.7		-2.4%				89.0%		90.1%
Other sales		12.4		11.3		9.2%				11.0%		9.9%
Total Net Sales		112.7		114.1		-1.2%				100.0%		100.0%
Consumption (*)		(52.0)		(53.7)		-3.1%				-46.2%		-47.1%
Labor		(24.9)		(20.3)		22.8%				-22.1%		-17.8%
Industrial Costs		(6.6)		(6.6)		1.3%				-5.9%		-5.8%
of which: Depreciation, Amortization		(2.0)		(2.3)		-12.6%				-1.8%		-2.0%
Cost of Sales		(83.6)		(80.5)		3.8%				-74.2%		-70.6%
Industrial Margin		29.1		33.5		-13.2%				25.8%		29.4%
Selling Expenses		(16.6)		(16.1)		2.8%				-14.7%		-14.1%
Transportation		(11.0)		(11.4)		-3.7%				-9.8%		-10.0%
Commissions		(2.2)		(2.3)		-6.4%				-1.9%		-2.0%
Advertising		(3.4)		(2.4)		43.4%				-3.0%		-2.1%
Other Selling and G&A		(23.5)		(24.8)		-5.1%				-20.9%		-21.7%
of which: Depreciation, Amortization		(0.9)		(1.8)		-49.1%				-0.8%		-1.6%
EBITDA		(8.0)		(3.3)						-7.1%		-2.9%
EBIT		(11.0)		(7.4)						-9.7%		-6.5%
Interest Income/(Costs), Net		(0.2)		(0.1)
Foreign Exchange, Net		0.3		(2.7)
Other Income/(Cost), Net		(3.6)		(1.8)
Earning before Income Taxes		(14.5)		(11.9)						-12.8%		-10.5%
Current taxes		(0.3)		(2.1)						-0.3%		-1.8%
Net Result		(14.8)		(14.0)						-13.1%		-12.3%
Minority interest		(0.0)		(0.2)
Net Group Result		(14.8)		(14.2)						-13.1%		-12.4%
Net Group Result per Share		(0.27)		(0.26)
Key Figures in U.S. dollars		Three months ended on				Change				Percentage of Sales
(millions)		30-Jun-14		30-Jun-13		%				30-Jun-14		30-Jun-13
Total Net Sales		154.5		156.4		-1.2%				100.0%		100.0%
Industrial Margin		39.9		46.0		-13.2%				25.8%		29.4%
EBIT		(15.1)		(10.1)						-9.7%		-6.5%
Net Group Result		(20.2)		(19.5)						-13.1%		-12.4%
Net Group Result per Share		(0.37)		(0.35)
Average exchange rate (U.S.$ per 1€)		1.3715
(*) Purchases plus beginning stock minus final stock and leather processing

UPHOLSTERY NET SALES BREAKDOWN
GEOGRAPHIC BREAKDOWN
		NET SALES (in €, million)												NET SALES (in seats sold)
		Three months ended on												Three months ended on
AREA		30-Jun-14		%		30-Jun-13		%		delta				30-Jun-14		%		30-Jun-13		%		delta
Americas		39.7		39.6%		44.7		43.5%		-11.1%				196,369		48.1%		221,111		51.1%		-11.2%
Natuzzi		24.9		24.8%		27.6		26.9%		-9.9%				97,814		24.0%		119,074		27.5%		-17.9%
Private label		14.9		14.8%		17.1		16.6%		-13.0%				98,555		24.1%		102,037		23.6%		-3.4%
EMEA		48.3		48.2%		45.8		44.6%		5.4%				168,780		41.3%		166,543		38.5%		1.3%
Natuzzi		38.5		38.4%		36.5		35.6%		5.4%				105,668		25.9%		109,359		25.3%		-3.4%
Private label		9.8		9.8%		9.3		9.1%		5.4%				63,113		15.5%		57,185		13.2%		10.4%
Asia-Pacific		12.3		12.2%		12.2		11.9%		0.5%				43,213		10.6%		45,143		10.4%		-4.3%
Natuzzi		11.7		11.6%		10.8		10.5%		8.0%				38,535		9.4%		35,356		8.2%		9.0%
Private label		0.6		0.6%		1.4		1.4%		-57.0%				4,678		1.1%		9,787		2.3%		-52.2%
TOTAL		100.3		100.0%		102.7		100.0%		-2.4%				408,361		100.0%		432,796		100.0%		-5.6%
BREAKDOWN BY BRAND
		NET SALES (in €, million)												NET SALES (in seats sold)
		Three months ended on												Three months ended on
BRAND		30-Jun-14		%		30-Jun-13		%		delta				30-Jun-14		%		30-Jun-13		%		delta
Natuzzi		75.0		74.8%		74.9		72.9%		0.1%				242,016		59.3%		263,788		60.9%		-8.3%
Private label		25.3		25.2%		27.8		27.1%		-9.1%				166,345		40.7%		169,009		39.1%		-1.6%
TOTAL		100.3		100.0%		102.7		100.0%		-2.4%				408,361		100.0%		432,796		100.0%		-5.6%
"Natuzzi" includes the Group's three lines of product: Natuzzi Italia, Natuzzi Editions and Natuzi Re-Vive

Natuzzi S.p.A. and Subsidiaries
Unaudited Consolidated Profit & Loss for the first half 2014 & 2013 on the basis of Italian GAAP
(expressed in millions Euro, except per share amounts)
		Six months ended on				Change				Percentage of Sales
		30-Jun-14		30-Jun-13		%				30-Jun-14		30-Jun-13
Upholstery net sales		188.2		201.7		-6.7%				89.2%		89.7%
Other sales		22.9		23.1		-1.0%				10.8%		10.3%
Total Net Sales		211.1		224.8		-6.1%				100.0%		100.0%
Consumption (*)		(96.5)		(104.0)		-7.2%				-45.7%		-46.3%
Labor		(44.0)		(41.3)		6.4%				-20.8%		-18.4%
Industrial Costs		(13.4)		(13.8)		-2.9%				-6.4%		-6.1%
of which: Depreciation, Amortization		(4.5)		(4.7)		-3.5%				-2.1%		-2.1%
Cost of Sales		(153.9)		(159.2)		-3.3%				-72.9%		-70.8%
Industrial Margin		57.1		65.6		-13.0%				27.1%		29.2%
Selling Expenses		(32.5)		(33.3)		-2.2%				-15.4%		-14.8%
Transportation		(21.2)		(22.7)		-6.3%				-10.1%		-10.1%
Commissions		(4.4)		(4.8)		-6.7%				-2.1%		-2.1%
Advertising		(6.9)		(5.8)		17.5%				-3.2%		-2.6%
Other Selling and G&A		(45.0)		(46.6)		-3.5%				-21.3%		-20.7%
of which: Depreciation, Amortization		(2.0)		(3.4)		-40.6%				-0.9%		-1.5%
EBITDA		(13.9)		(6.2)						-6.6%		-2.8%
EBIT		(20.4)		(14.3)						-9.7%		-6.3%
Interest Income/(Costs), Net		(0.5)		(0.2)
Foreign Exchange, Net		1.1		(1.2)
Other Income/(Cost), Net		(3.9)		(1.3)
Earning before Income Taxes		(23.7)		(16.9)						-11.2%		-7.5%
Current taxes		(0.8)		(3.1)						-0.4%		-1.4%
Net Result		(24.5)		(20.0)						-11.6%		-8.9%
Minority interest		(0.0)		(0.2)
Net Group Result		(24.5)		(20.2)						-11.6%		-9.0%
Net Group Result per Share		(0.45)		(0.37)
Key Figures in U.S. dollars		Six months ended on				Change				Percentage of Sales
(millions)		30-Jun-14		30-Jun-13		%				30-Jun-14		30-Jun-13
Total Net Sales		289.3		308.2		-6.1%				100.0%		100.0%
Industrial Margin		78.3		90.0		-13.0%				27.1%		29.2%
EBIT		(28.0)		(19.6)						-9.7%		-6.3%
Net Group Result		(33.6)		(27.7)						-11.6%		-9.0%
Net Group Result per Share		(0.61)		(0.50)
Average exchange rate (U.S.$ per 1€)		1.3709
(*) Purchases plus beginning stock minus final stock and leather processing

UPHOLSTERY NET SALES BREAKDOWN
GEOGRAPHIC BREAKDOWN
		NET SALES (in €, million)												NET SALES (in seats sold)
		Six months ended on												Six months ended on
AREA		30-Jun-14		%		30-Jun-13		%		delta				30-Jun-14		%		30-Jun-13		%		delta
Americas		73.0		38.8%		84.5		41.9%		-13.6%				368,559		47.2%		415,814		49.1%		-11.4%
Natuzzi		43.1		22.9%		52.4		26.0%		-17.8%				173,501		22.2%		222,542		26.3%		-22.0%
Private label		29.9		15.9%		32.1		15.9%		-6.7%				195,058		25.0%		193,272		22.8%		0.9%
EMEA		92.6		49.2%		95.2		47.2%		-2.7%				330,599		42.3%		352,382		41.6%		-6.2%
Natuzzi		73.9		39.3%		74.2		36.8%		-0.3%				211,892		27.1%		223,866		26.5%		-5.3%
Private label		18.7		9.9%		21.0		10.4%		-11.2%				118,707		15.2%		128,516		15.2%		-7.6%
Asia-Pacific		22.6		12.0%		22.1		10.9%		2.5%				81,530		10.4%		78,023		9.2%		4.5%
Natuzzi		21.3		11.3%		19.9		9.9%		7.1%				71,793		9.2%		62,678		7.4%		14.5%
Private label		1.3		0.7%		2.2		1.1%		-40.0%				9,737		1.2%		15,346		1.8%		-36.5%
TOTAL		188.2		100.0%		201.7		100.0%		-6.7%				780,688		100.0%		846,219		100.0%		-7.7%
BREAKDOWN BY BRAND
		NET SALES (in €, million)												NET SALES (in seats sold)
		Six months ended on												Six months ended on
BRAND		30-Jun-14		%		30-Jun-13		%		delta				30-Jun-14		%		30-Jun-13		%		delta
Natuzzi		138.3		73.5%		146.5		72.6%		-5.6%				457,186		58.6%		509,085		60.2%		-10.2%
Private label		49.9		26.5%		55.2		27.4%		-9.7%				323,502		41.4%		337,134		39.8%		-4.0%
TOTAL		188.2		100.0%		201.7		100.0%		-6.7%				780,688		100.0%		846,219		100.0%		-7.7%
"Natuzzi" includes the Group's three lines of product: Natuzzi Italia, Natuzzi Editions and Natuzi Re-Vive

Natuzzi S.p.A. and Subsidiaries
Unaudited Consolidated Balance Sheets on the basis of Italian GAAP
(Expressed in millions of Euro)
ASSETS		30-Jun-14		31-Dec-13
Current assets:
Cash and cash equivalents		41.9		61.0
Marketable debt securities		0.0		0.0
Trade receivables, net		82.6		78.9
Other receivables		35.3		48.5
Inventories		85.1		79.0
Unrealized foreign exchange gains		0.2		0.6
Prepaid expenses and accrued income		1.9		1.9
Deferred income taxes		0.3		0.3
Total current assets		247.4		270.2
Non-current assets:
Net property, plant and equipment		140.6		143.6
Other assets		8.1		8.1
Total non-current assets		148.7		151.7
TOTAL ASSETS		396.1		421.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings		21.1		25.0
Current portion of long-term debt		3.4		3.3
Accounts payable-trade		72.0		67.4
Accounts payable-other		23.2		25.8
Unrealized foreign exchange losses		0.9		0.2
Income taxes		1.3		7.1
Deferred income taxes		1.0		1.0
Salaries, wages and related liabilities		17.8		8.3
Total current liabilities		140.6		138.2
Long-term liabilities:
Employees' leaving entitlement		24.9		24.8
Long-term debt		2.2		4.2
Deferred income taxes		-		-
Deferred income for capital grants		8.4		8.6
Other liabilities		33.7		34.4
Total long-term liabilities		69.2		72.1
Minority interest		2.7		2.7
Shareholders' equity:
Share capital		54.9		54.9
Reserves		42.8		42.8
Additional paid-in capital		8.4		8.4
Retained earnings		77.5		102.8
Total shareholders' equity		183.6		208.9
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		396.1		421.9

Natuzzi S.p.A. and Subsidiaries
Consolidated Statements of Cash Flows		Six months ended on
(Expressed in million of Euro)		30-Jun-14		30-Jun-13
Cash flows from operating activities:
Net earnings (loss)		(24.5)		(20.2)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		6.5		8.0
Impairment of long lived assets		2.2		-
Deferred income taxes		(0.1)		(0.2)
Minority interest		0.0		0.2
(Gain) loss on disposal of assets		(0.0)		0.2
Unrealized foreign exchange losses (gains)		1.1		0.5
Extraordinary items, net		1.0		0.7
Deferred income for capital grants		(0.2)		(0.2)
Non monetary operating items		10.5		9.2
Change in assets and liabilities:
Receivables, net		(3.8)		4.7
Inventories		(6.1)		(2.2)
Prepaid expenses and accrued income		0.0		0.4
Accounts payable		4.9		(10.4)
Income taxes		(5.8)		1.8
Salaries, wages and related liabilities		8.6		1.2
Other assets/liabilities, net		9.4		4.0
Employees' leaving entitlement		-		-
Net working capital		7.2		(0.4)
Net cash generated/(used) by operating activities		(6.8)		(11.4)
Cash flows from investing/restructuring activities:
Property, plant and equipment:
Additions		(5.0)		(3.3)
Disposals		0.1		0.0
Goverment grants received		0.5		-
One time termination benefits		(1.1)		-
Lay-off/Rent penalty dos closure		(0.2)		-
Net cash generated/(used) by investing/restructuring activities		(5.7)		(3.2)
Cash flows from financing activities:
Long-term debt:
Proceeds		-		-
Repayments		(1.9)		(2.3)
Short-term borrowings		(4.0)		5.0
Dividends paid to minority interests		-		(0.2)
Net cash generated/(used) by financing activities		(5.9)		2.5
Effect of translation adjustments on cash		(0.7)		1.5
Increase (decrease) in cash and cash equivalents		(19.2)		(10.6)
Cash and cash equivalents, beginning of the year		61.0		77.7
Cash and cash equivalents, end of the period		41.9		67.1