Natuzzi rebounds to profit
By Joan Gunin -- Furniture Today, June 12, 2006
Santeramo In Colle, Italy — Upholstery manufacturer Natuzzi rebounded to an $8.2 million profit in the first quarter, compared with a loss of $4.6 million in the comparable quarter a year ago.
Sales in euros rose 13% in the first quarter, to the equivalent of $226.5 million. Measured in dollars, the increase was just 4%, because of changes in currency exchange rates. Last year's first quarter sales came to $218.4 million.
After a sales decline and a loss for the full year of 2005, the company said the upturn can be attributed in part to a shift toward producing its mainstream Natuzzi-branded product outside Italy, and to a big surge in sales of its lower-end Italsofa brand.
Italsofa sales of $70.2 million in the quarter accounted for nearly 35% of total sales, up from 28% a year earlier. Sales of $131.3 million in Natuzzi-branded products amounted to 65% of the total, compared with 72% in the 2005 first quarter. (The company also sells some non-furniture products, such as accessories and raw materials.)
In euros, Natuzzi's gross profit climbed 17% in the latest quarter, rising to 34.3% of sales from 33.1% a year ago. The company posted an operating profit of 8.8 million euros, the equivalent of $10.6 million, compared with an operating loss a year earlier.
"First-quarter 2006 results confirmed the recovery in sales, particularly consistent in Europe, although the economic and currency scenario in which the company has been operating remains unfavorable as a whole," said founder, Chairman and CEO Pasquale Natuzzi.
"We continue to see mixed results, with the Italsofa line that drove the quarterly performance, and the Natuzzi brand, still curbed by a deflationary environment, particularly evident in the United States," he said. "The company is back to profitability as a result of the restructuring actions we have been implementing since June 2005."
The company decided in October 2005 to make its midlevel Natuzzi-branded line outside Italy. The move enabled the company to cut prices by 10% to 15% or more and "put value back in," said Fred Starr, CEO and chairman of Natuzzi Americas.
The high-end Pasquale Natuzzi Collection is still made in Italy. Natuzzi also has factories in Brazil, China and Romania.
First quarter upholstery sales reached $201.4 million, with seats sold rising 6.1%.
Sales in the Americas came to $76.8 million.
Sales of leather-covered upholstery were 86% of total sales in the first quarter, compared with 82% a year ago, while sales of fabric-covered furniture decreased to 14% of the total from 18% last year.
| Natuzzi (a) | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 3/31 | 2006 | 2005 | Change |
| (a) In European euros, except for earnings per share, which are in U.S. dollars. (b) Converted at the rate of 1 euro = U.S. $1.2033 for the 2006 quarter and 1 euro = U.S. $1.3112 for the 2005 quarter. | |||
| Sales | 188,200,000 | 166,600,000 | 13.0% |
| Operating income | 8,800,000 | (1,100,000) | — |
| Net income | 6,800,000 | (3,500,000) | — |
| Earnings per share (b) | $0.14 | ($0.08) | — |
