Natuzzi SpA Q3 FY2024 earnings call

1. Sales: First nine months sales were EUR243.9 million, in line with the previous year. Branded business grew 6.3% vs 2023 and 20.8% vs 2019. 2. Restructuring: There was a EUR4.8 million one-off severance restructuring cost in the first nine months. 538 people were laid off in the first nine months, with a total of 1,110 people laid off since the beginning of 2021, accounting for 26% of the total workforce. 3. Financials: Gross margin for the first nine months was 35.8%, operating loss was EUR3.8 million, excluding the severance cost, operating profit was EUR1.2 million. Financial costs were EUR7.4 million. 4. Investments: Invested EUR5.4 million primarily in factories and a new store in Denver. 5. Asset divestment: Sold High Point with a first installment of EUR3.8 million, and signed a contract to sell a non-strategic land in Romania, with first installment received, expected to complete in 2025 with a value of EUR2.9 - 3.1 million. 6. Retail: Focused on completing guidelines to elevate customer experience, implementing new store concept, integrating FOS stores into the system. 7. Wholesale: Reimagined gallery format to improve performance of partners and represent the brand better. 8. Trade and contract: Natuzzi Harmony House - Residence opened in Dubai, showcasing brand strength. 9. China: Closed Shanghai plant, moved production to Quanjiao with 30% efficiency improvement, expected to materialize in 2025.

In the first nine months of 2024, Natuzzi's sales were EUR243.9 million, in line with the previous year. The branded business showed stronger performance, growing 6.3% compared to 2023 and 20.8% compared to 2019. The branded business accounts for 93% of the sales. The gross margin for the first nine months was 35.8%, and excluding the one-off severance cost of EUR4.8 million, it would have been 37.4%.

1. The sale of the non-strategic land in Romania is expected to complete in 2025 with a value of EUR2.9 - 3.1 million. 2. The move of production from Shanghai to Quanjiao is expected to bring a gross margin improvement of 200 - 300 basis points in 2025. 3. The new commercial division in Dubai has a five-year business plan, aiming for margin accretive performance.

1. Potential tariffs by the new US administration which may affect logistics and costs. 2. Market volatility, interest rate changes, geopolitical factors that can impact the business.

Q: What is the impact of potential tariffs by the new US administration on the company?

A: We are preparing to deal with potential evolution of logistics and tariff. We are considering using Vietnam as a production platform to reduce dependence on China production.

Q: What is the order flow improvement situation in Q4?

A: In the last 10 weeks, there has been a better performance in orders compared to previous weeks. China's stimulus package has brought more orders.

Q: When was the move from Shanghai to Quanjiao done and what is the impact on the P&L?

A: The official closing of Shanghai was at the end of September. The Quanjiao factory is ramping up capacity. It is expected to take 12 months to reach full efficiency, and we can see the impact in 2025, with a gross margin improvement of 200 - 300 basis points.

Q: What is the future scale of the new commercial division in Dubai?

A: There is a five-year business plan, aiming for margin accretive performance and bringing incremental business.

Q: Will it be sustainable to be profitable when revenue exceeds EUR75 million in the future?

A: We have lowered the breakeven point. Incremental business will bring higher EBITDA and cash conversion, so it is sustainable to be profitable when revenue exceeds the relevant amount.