Natuzzi 2Q profits drop
Joan Gunin -- Furniture Today, September 7, 2003
Santeramo in Colle, Italy — Upholstery giant Natuzzi said second-quarter sales decreased 6.6% in euros, although total seats sold inched up 0.6%.
Gross profits in the quarter dropped 11.8% in euros, as gross margins slipped to 34.4% from 36.4% in last year's comparable quarter.
Operating income plunged 68.7%, and net income was down 50.7% in the latest quarter.
Sales in U.S. dollars, relatively weak versus the euro, rose 15.5% to $230.1 million in the second quarter from $199.3 million a year ago.
In the six months, sales in euros decreased 10.3% and total seats sold slipped 1.8%. First-half net income dropped 40.4%.
In the second quarter, net upholstery sales decreased 9.8%, while sales of accessories and raw materials produced for third parties increased 27%.
Second-quarter net upholstery sales in the Americas were $90.3 million, down 20.7% from the previous year's quarter. In Europe, net upholstery sales increased 5.1% to $102.9 million, while in the rest of the world, upholstery sales decreased 25% to $10.2 million.
Leather upholstery sales, which accounted for 82.1% of total upholstery sales in the quarter, dropped 14% over last year's quarter, while fabric upholstery sales rose 16.4%.
"This shift from leather to fabric reflects a market strongly focused on price," said Nicola Dell'Edera, finance director.
Second-quarter sales of Natuzzi-branded furniture was down 11.7% from last year, while net sales of lower-priced Italsofa-branded furniture dipped 1.3%.
Pasquale Natuzzi, chairman and chief executive officer, attributed second-quarter decreases mainly to the strong appreciation of the euro against the U.S. dollar and other currencies, and to growing competition from low-cost countries such as China.
"The strong pressure on prices, the consistent appreciation of the euro and increasing investments related to the opening of new galleries and stores and advertising, had a negative impact on net income for the period," Natuzzi said.
He cited company initiatives to increase productivity and reduce costs, and said the company would introduce a stock option plan for management and key people by the end of 2003.
| Natuzzi(a) | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 6/30 | 2003 | 2002 | Change |
| (a) Converted from euros to U.S. dollars at the average exchange rate of U.S.$1.1359=1 euro in the 2003 quarter, U.S.$0.9185=1 euro in the 2002 quarter, U.S.$1.1051=1 euro in the 2003 six months and U.S.$0.8981=1 euro in the 2002 six months. |
|||
| Sales | $230,100,000 | $199,300,000 | 15.5% |
| Operating income | 9,300,000 | 29,700,000 | (68.7%) |
| Net income | 13,500,000 | 27,400,000 | (50.7%) |
| Earnings per share | 0.25 | 0.50 | (50.0%) |
| 6 months ended 6/30 | 2003 | 2002 | Change |
| Sales | $426,700,000 | $386,700,000 | 10.3% |
| Operating income | 23,500,000 | 57,400,000 | (59.1%) |
| Net income | 29,500,000 | 49,500,000 | (40.4%) |
| Earnings per share | 0.54 | 0.91 | (40.7%) |
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