Natuzzi sales up, profits off
By Joan Gunin -- Furniture Today, April 4, 2004
SANTERAMO IN COLLE, Italy — Upholstery giant Natuzzi reported lower earnings for the fourth quarter and all of 2003, despite a gain in unit sales.
Expressed in dollars, earnings for the quarter fell 76.6% from the comparable period a year earlier to $4.3 million. Earnings fell 51.2% for all of 2003 to $42.2 million.
Expressed in euros, the declines were 80.4% for the quarter and 59.2% for the year.
Pasquale Natuzzi, chairman and CEO, said fourth-quarter profitability was affected by "an extraordinary loss and the same factors reported in the previous three quarters: a strong appreciation of the euro, higher investments in advertising and new store and gallery openings, and the persistent pricing pressure coming from low-cost countries."
Unit sales increased last year with seats sold up 6.2% in the fourth quarter and 1% for the year.
Fourth-quarter sales of $249.4 million were up 23% in dollars from the same period a year earlier. Sales for the full year rose 14.4% to $870.9 million.
But expressed in euros, the company's sales were up only 3.5% in the fourth quarter and declined 4.4% for the year. The strength of the euro against the dollar was a factor in the performance, the chairman said.
"The decrease in sales reported in 2003, compared to 2002, was due to the unfavorable translation effect caused by the strong appreciation of the euro against the U.S. dollar and was only partially offset by a marginal increase in seats sold," he said.
"In a market dominated by a fierce price competition, Italsofa, our promotional brand, continued its double-digit growth, while Natuzzi, the brand addressing the medium-high end of the market, reported lower sales."
In the fourth quarter, Natuzzi-branded sales of $169.8 million were down 4.8% from a year earlier, while Italsofa sales jumped 19.2% to $47.4 million.
Upholstery sales in the Americas decreased 6.6% to $94.5 million in the quarter as consequence of a higher conversion rate, the company said.
Leather upholstery sales worldwide in the quarter totaled $177.9 million, while sales of fabric upholstery — including microfiber — rose 12.6% over last year's quarter to $39.3 million.
Pasquale Natuzzi said the company remains "focused on strengthening the Natuzzi brand and on increasing our market share of the promotional segment of the market using the Italsofa brand.
"In light of the above, as well as encouraging order growth in the first 11 weeks of 2004 and planned improvements in operating efficiencies, we expect to deliver approximately a 5% year-over-year increase in seats sold and a net profit margin in the region of 5%."
Natuzzi also proposed cutting its annual dividend to 0.14 euro per share from 0.33 euro per share last year.
| • Natuzzi(a) | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are loses or declines. | |||
| Quarter ended 12/31 | 2003 | 2002 | Change |
| (a) Converted from euros to U.S. dollars at the average exchange rate of 1 euro = $1.19 for the 2003 quarter, 1 euro = $1.00 for the 2002 quarter, 1 euro = U.S. $1.13 for the 2003 year and 1 euro = U.S. $.95 for the 2002 year. (b) Includes a $595,000 income tax benefit. |
|||
| Sales | $249,400,000 | $202,700,000 | 23.0% |
| Operating income | 12,400,000 | 19,900,000 | (37.7%) |
| Net income | (b)4,300,000 | 18,400,000 | (76.6%) |
| Earnings per share | 0.08 | 0.34 | (75.3%) |
| Year ended 12/31 | 2003 | 2002 | Change |
| Sales | $870,900,000 | $761,500,000 | 14.4% |
| Operating income | 47,900,000 | 96,300,000 | (50.3%) |
| Net income | 42,200,000 | 86,500,000 | (51.2%) |
| Earnings per share | 0.77 | 1.58 | (51.2%) |
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