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Natuzzi S.p.A.: Full Year 2013 Consolidated Financial Results

Stocks in this article: NTZ

The Board of Directors of Natuzzi S.p.A. (NYSE:NTZ) (“Natuzzi” or “the Company”), the largest furniture house in Italy and the player with the greatest global reach in its sector, has approved its consolidated financial results for full year 2013.

After the meeting of the Board of Directors, Pasquale Natuzzi, President and CEO, issued the following statement:

“2013 was a year during which we dedicated our efforts to defining all the actions necessary to reorganize the Group, and to optimize and streamline our processes to reduce costs and recover efficiency. The restructuring of the Group’s operations has also generated extraordinary items that heavily affected our overall results.

The Group’s 2013 statement of operations reports an operating loss of €32.5 million (compared to a loss of €17.3 million in 2012).

These results derive partly from Group-operated stores located in Western Europe, where we recognized operating losses of €10.6 million. The 2014-2016 Business Plan that was approved by the Company’s board of directors on February 28, 2014 contemplates specific efficiency recovery measures to return to profitability, including the closure of 13 non-performing, Group-operated stores within the end of 2014.

Net losses during 2013 also include the negative performance of our Brazilian operations, equal to a loss of €7.2 million, reflecting sales volumes that were inconsistent with our overall cost structure and production capacity in that market. In this regard, we have begun targeted due diligence to quickly identify those measures that are necessary to eliminate losses in that country.

The remaining operating losses derive from the Group’s industrial operations – where we experienced a low level of productivity and higher production costs – as well as in selling, general and administrative costs.

With reference to this last point, the 2014-2016 Plan contemplates, in particular:

1)   The rationalization of our Italian operations, aimed at reducing production costs and improving productivity (the latter of which saw a decline in 2013 due to the rotation of workers involved in the CIGS program, under which the Italian Government covers the majority of the wages of workers involved in the program). These changes were provided for by the agreement entered into between the Company and unions on October 10, 2013, under the supervision of the Minister of Economic Development, which contemplated 1,506 redundant employees being subject to layoffs, including 600 who would be offered voluntary departure incentives (390 have already accepted these incentives).
 
2)

The continuation of our product innovation initiatives, which began three years ago and were accelerated in 2013. Currently 50% of our turnover is already generated by 147 models that can be produced with our new moving-line industrial processes. During 2014, and according to a well-defined timetable, an additional 120 models will be re-engineered to permit production on our moving line (including 35 that have already been re-engineered), representing a further 40% of total turnover. Within the end of 2014, we expect that 90% of total upholstery turnover will be represented by models that can be manufactured on our moving-line industrial process.

 
3) The complete implementation of the industrial moving-line process within all of the Group’s manufacturing facilities. In 2013, we brought on 18 new production lines, adding to six lines that were already running at the end of 2012. The implementation of the new moving lines has continued during the initial months of 2014 (with 15 new moving lines being implemented) and will continue through the rest of 2014, bringing the total number of the new production lines to 50.
 
4) Efficiency improvements in back-office processes worldwide, through the implementation of a centralized shared service structure that has been designed to reduce costs.
 
5) Efficiency improvements in the supply chain, through a reduction in inventory levels, optimization of transportation and a new logistics organization.
 

The 2013 consolidated EBIT was also negatively affected by the general strengthening of the Euro versus major currencies, for a total amount of €5.9 million.

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