Natuzzi S.p.A(US:NTZ)2024-12-13 19:52Financial Data and Key Metrics Changes - The company reported sales of EUR 243.9 million for the first nine months of 2024, consistent with the previous year, despite the sector facing strong headwinds [9] - The gross margin for the first nine months was 35.8%, unchanged from 2023, but improved from 29% in 2019 [14] - Excluding one-off severance costs, the operating profit would have been EUR 1.2 million, compared to an operating loss of EUR 0.7 million in 2023 [16] - Total financial costs increased to EUR 7.4 million from EUR 5.6 million in 2023, reflecting higher interest rates [17] Business Line Data and Key Metrics Changes - The branded business grew by 6.3% compared to 2023 and 20.8% compared to 2019, indicating a strong performance relative to the sector [10] - The company let go of 538 employees in the first nine months, reducing the workforce by 26% since 2021 [13] - The branded business now represents 93% of total sales, contributing to improved sales quality [15] Market Data and Key Metrics Changes - The third quarter sales were reported to be 0.1% above last year, with branded sales performing better [24] - The company is focusing on expanding its presence in the US, having opened five new stores in 2023 and one in Denver [28] Company Strategy and Development Direction - The company aims to become a branded retail company, focusing on retail and wholesale channels to improve brand representation [12][29] - A new division has been established to grow trade and contract business, with a focus on partnerships with real estate developers [36][98] - The company is divesting non-strategic assets to free up resources, including the sale of a tannery and land in Romania [19][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating potential tariff changes by diversifying production sources, including plans to open a facility in Vietnam [70][71] - There is optimism regarding order flow improvements in Q4, with a positive trend reported in the last 10 weeks [84] - The company is focused on maintaining profitability and reducing the breakeven point to EUR 75-85 million per quarter [110] Other Important Information - The company reported a significant reduction in cash position, from EUR 33.6 million at the beginning of the year to EUR 17.1 million by the end of September [21] - The restructuring efforts are aimed at improving operational efficiency and reducing costs [37] Q&A Session Summary Question: Impact of potential US tariffs - Management is preparing for potential tariff changes and is diversifying production to mitigate risks, including plans to utilize Vietnam as a production base [70][71] Question: Order flow improvements in Q4 - Management reported a positive trend in order flow since week 14, with better performance than previous weeks, but cautioned about the volatile external environment [84][85] Question: Cost savings from moving production from Shanghai - The Shanghai plant officially closed at the end of September, with expected efficiency improvements from the new Quanjiao facility materializing in 2025 [88][89] Question: Expected improvement in gross margin from China - Management anticipates a gross margin improvement of 200 to 300 basis points from the production shift [91] Question: Size of the new commercial division opportunity - The new division is expected to contribute significantly to revenue, with a five-year business plan in place, although specific numbers were not disclosed [100][101] Question: Profitability expectations above EUR 75 million - Management confirmed that the breakeven point has been lowered, and profitability is expected to improve with revenues above EUR 75 million [110][111]