Strong euro hurts Natuzzi
Joan Gunin -- Furniture Today, May 26, 2003
Santeramo in Colle, Italy — Upholstery producer Natuzzi's first-quarter sales, in euros, were down 14.1% from a year ago, largely because of the strengthening euro.
In dollars, sales actually rose to $196.9 million from $187.3 million in the first quarter of 2002. But Natuzzi's financial statements are in euros, which have appreciated by 22.4% against the U.S. dollar in the past year.
In the Americas, Natuzzi sales were flat with a year ago in dollars at $85 million, but down 18.8% in euros because of the exchange rate fluctuation. Unit sales in the region were up 3.9%.
Net income of $15.9 million in the latest quarter was down 28.4% from a year ago.
"The strong appreciation of the euro versus the U.S. dollar and other main currencies compared to the same period in 2002 produced a negative translation effect that was responsible for most of the decline in sales," said Pasquale Natuzzi, the company's chairman and chief executive officer.
"The decrease in net income was the result of lower revenues, higher contribution of sales from the promotional brand Italsofa and unchanged marketing investments that the company is incurring to raise Natuzzi brand awareness and improve its distribution quality," he said.
He said market conditions continue to "negatively impact" orders.
"The Natuzzi brand is affected by price competition never seen before in the marketplace, driven by competitors based in countries with low-cost production facilities," Natuzzi said. "For this reason, we are continuing to invest in brand-related marketing activities, the goal of which is to position Natuzzi in the medium-high end of the upholstery market. At the same time, we support the growth of Italsofa as a solid competitor in the low-end market."
Net upholstery sales in first-quarter 2003 were down 15.8% from a year ago, and came to $176.6 million in dollars. Seat units sold in the quarter were down 4.3% to 739,404 seats.
Leather upholstery sales in the quarter were $142.7 million, 18.4% lower than the year-earlier period. Fabric upholstery (microfiber) sales declined 2.5% to $33.9 million.
Natuzzi-branded furniture sales of $144.7 million were down 20.8%, while Italsofa sales of $32 million were up 17.8%.
| Quarter ended 3/31 | 2003 | 2002 | Change |
|---|---|---|---|
| Sales | $196,900,000 | $187,300,000 | 5.1% |
| Operating income | 13,800,000 | 27,700,000 | (50.2%) |
| Net income | 15,900,000 | 22,200,000 | (28.4%) |
| Earnings per share | 0.29 | 0.40 | (27.5%) |
