GuruFocus –
- Sales for First Nine Months 2024: EUR243.9 million, in line with the previous year.
- Branded Business Growth: 6.3% increase compared to 2023.
- Gross Margin for First Nine Months 2024: 35.8%, same as 2023; adjusted for severance costs, 37.4%.
- Operating Loss for First Nine Months 2024: EUR3.6 million; adjusted for one-off severance costs, an operating profit of EUR1.2 million.
- Financial Costs for First Nine Months 2024: EUR7.4 million, up from EUR5.6 million in 2023.
- Cash Position as of September 2024: EUR17.1 million, down from EUR33.6 million at the beginning of the year.
- Cash Used in Operations: EUR5.1 million, with EUR6 million for workforce reduction.
- Investment in 2024: EUR5.4 million, primarily in factory and new store in Denver.
- Third Quarter 2024 Sales: 0.1% increase compared to 2023.
- Gross Margin for Third Quarter 2024: 31.8%; adjusted for severance costs, 35.7%.
- Operating Loss for Third Quarter 2024: EUR400,000, adjusted for severance costs, compared to a loss of EUR1.1 million in 2023.
Release Date: December 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Natuzzi SpA (NYSE:NTZ) reported sales in line with the previous year, despite industry headwinds, indicating resilience.
- The company’s branded business showed strong performance, with a 6.3% growth compared to 2023.
- Gross margin improved to 37.4% when excluding one-off severance costs, compared to 36.3% in 2023.
- Natuzzi SpA (NYSE:NTZ) is successfully divesting non-strategic assets, freeing up cash for strategic investments.
- The company is expanding its retail presence, with new store openings in the US, including a new store in Denver.
Negative Points
- Natuzzi SpA (NYSE:NTZ) reported an operating loss of EUR3.6 million for the first nine months of 2024.
- The company’s cash position decreased significantly from EUR33.6 million to EUR17.1 million by the end of September.
- Financial costs increased to EUR7.4 million, up from EUR5.6 million in 2023, due to higher interest rates.
- The third quarter was notably soft, with a decline in gross margin due to specific factors.
- The company faced restructuring costs of EUR4.8 million, impacting overall profitability.
Q & A Highlights Q: There is talk that the next presidential administration in the United States might implement some tariffs. How might this affect Natuzzi?
A: Antonio Achille, CEO, responded that while they cannot predict the administration’s decisions, Natuzzi is preparing to handle potential changes in logistics and tariffs. They are establishing multiple production areas, including a new platform in Vietnam, to navigate such circumstances. Vietnam, unlike China, does not have tariffs when exporting to the US, which could be advantageous.
Q: Can you comment on the order flow improvements in Q4 following Q3?
A: Antonio Achille noted that since week 40, they have observed a positive trend in order flow compared to previous weeks. While the situation remains volatile, the last 10 weeks have shown better performance. They are hopeful for specific measures in 2025, such as interest rate changes and stimulus packages in China, which could benefit the furniture industry.
Q: Regarding the move from Shanghai, what is the expected impact on production costs or gross margin?
A: The Shanghai plant closed at the end of September, and production moved to Quanjiao, which is ramping up capacity. Achille expects a 200 to 300 basis point improvement in gross margin due to this move, with full efficiency anticipated in 2025.
Q: Can you quantify the potential size of the new commercial division, particularly in Dubai, over the next year or two?
A: Antonio Achille explained that while they do not provide specific guidance, the new division has a five-year business plan aimed at building incremental business in the contract and trade sectors. The division is expected to contribute significantly to revenue, with a target of being margin accretive.
Q: Without the restructuring charge, Natuzzi was profitable on an operating basis. Is it safe to say that above certain revenue levels, the company should sustain profitability?
A: Achille confirmed that they have significantly lowered their breakeven point, which used to be over EUR100 million per quarter. Now, the breakeven is around EUR75 million to EUR85 million, meaning incremental business above this level should result in higher EBITDA and cash conversion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
