Natuzzi S.p.A. ($NTZ)

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Natuzzi S.p.A. Fourth Quarter 2020 Financial Results Conference Call and Webcast. [Operator Instructions] Joining us on today's call, as usual are Pasquale NatuzziExecutive Chairman and Chief Executive Officer; Carlo Silvestri Chief Financial Officer; and Piero Direnzo, Investor Relations. As a reminder, today's call is being recorded. I will now turn the conference call over to Piero. Please go ahead.

Thank you, Kevin, and good day to everyone. Thank you for joining the Natuzzi's conference call for the 2025 and fourth quarter financial results. After a brief introduction, we will give room for the Q&A session. Before proceeding, we would like to advise our listeners that our discussion today could contain certain statements that constitute forward-looking statements under the United States securities laws. Obviously, actual results might differ materially from those in the forward-looking statements because of risks and uncertainties that can affect our results of operations and financial condition. Please refer to our most recent annual report on Form 20-F filed with the SEC for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call. And now I would like to turn the call over to the company's Chief Executive Officer. Please, Mr. Natuzzi.

Thank you. Good morning, everyone. And thank you for joining us in today's conference call. Our fourth quarter and full year 2025 results reflect a persistent and unfavorable macroeconomic indigent. The market condition we call rental phase requires responsible timely and structurally decision. Consequently, we are working on a reorganization plan designed to restore the company to a stronger economic capital and financial foundation over the medium term. A core pillar of this strategy in large the allocation of our low-margin Italian production capacity because that is no longer sustainable under the current Italian cost structure. Therefore, we are shifting this volume to other manufacturing facility within the group, like Romania, for example, or could be China, could be Brazil or could be Vietnam, where we still have our manufacturing company. The shift will involve rationalization of our return for factories, including our celery and logistics center. So tests primarily the plan we are working on and to go forward. So I ask Carlo, our CFO, event to comment something, and then I will [ be available ] for any questions. Thank you.

Thank you, Mr. Natuzzi. Good morning, everybody. Allow me to give me a little bit of more color of the numbers we did present, and then I will give you also more information of our strategic plan and how we intend to face it. First of all, we need to give a comment on our gross margin. specifically because like from 38.1% in fourth quarter last year, we did achieve 3.2% this year. The main reason that we did analyze stays also within the production shift that of certain [indiscernible] addition for the U.S. market from the Chinese factor to Vital factories. As you may recall, last year, we did plan such shift with the goal of avoid the trade tariff in pole badaministaev for administration for products manufacturing in Asia. The subsequent trade tariff imposition of the EU production has offset the benefits. And on top of that, we are expecting government grants that did not materialize for that. So at the end, we were penalized from this shift. On top of that, in the fourth quarter, we did book a EUR 2.3 million impairment of machinery and equipment at certain Italian factories. The record of such impairment was the result of a prudent outlook of the current business environment in which we do operate, resulting in a more difficult recoverability of such nonfinancial assets. If you do exclude this impairment, the gross margin would have been 33.2% always compared to 38.1% of last year. The difference between the 38% and the 33.2% apart the impact of the shift on foot addition stays in the lower direct retail -- the sales coming from the retail channel compared to [ last ] and unfavorable sales mix, we have seen less Natalia and more to edition sold in the quarter. So as Mr. Natuzzi was mentioning, we are in the middle of the restructuring plan that aim to create sustainability in the medium and long term. So what we are doing is on the top part, where also continuous reviewing our price lease to leverage and to recover from negative effect from U.S. tread duties and also from the strengthening of the euro. On the industrial part, even in the fourth quarter, we are also trying to reduce the impact of our industrial labor costs. So in the EUR 17.1 million, you will find in our fourth quarter labor cost we did book 700,000 as accrual for cost reduction. Now going back to the other impairment that we did book in our fourth quarter 2025 to have a more prudent view on our performances in the next future. We need to mention that we are continuously reviewing our DOS performances and while we keep believing Tabar retail strategy, will be the core of our business, we have booked a EUR 4.4 million impairment loss on our financial assets related to the retail operation, principally in Europe and in U.S. At the same, we did book in the administrative expenses, a EUR 1.9 million accrual for impairment of nonfinancial assets compared to EUR 500,000 book last year. At the same time, the company remains fully committed in reducing the cost of the overall structure in Italy and in some selected commercial subsidiaries and the structure, let's say, strategy is keep growing and will be a focus even for 2026. From the cash flow perspective, the -- two points that I would like to highlight is that for the operating activities, we used EUR 4.5 million. But the most important thing is that we did -- we had a benefit from EUR 2.5 million of our improvement of our working capital change that is mainly given by EUR 13 million decrease in inventory level. So we're also focusing on this point to create value for the company, try to maximize our inventory and to increase the stock, while we did decrease our trade paper and other liabilities. On top of that, it's extremely important that in our investing activities, the main let's say, contributor has been EUR 9.9 million collected in connection with the completion of the sales of 2 nonstrategic assets, namely the land in Romania for EUR 2.4 million and the completion of the sales of 47.5 million. As Mr. Natuzzi was mentioning the rationalization of our industrial process will bring us with some assets that we are -- will be able to sell and contribute to our restructuring process. Now we have been discussing in our press release of the legal framework that we will operate to be more efficient in this restructuring process. I'm not the person, but I would like to give you more clarity a more, let's say, information about this process because it's important that we have all a clear information about this framework. The Board of Director, [indiscernible], Mr. Natuzzi to initiate a specific procedure under the Italian corporate law framework, called [ Composite gosadeLakDC ] and sea [indiscernible]. And this will be confirmed because our submission will be let's say, official in the coming weeks. What is the CMC, is a voluntary out-of-court restructuring procedure, specifically to Italian Compass only and designated to facilitate an early and orderly management of the group position while preserving business continuity, industrial value and the interest of all the stakeholders. It's extremely important to underline that under this procedure the company is able to continue its normal daily operations under the guidance of the current management team and the shareholders continue to exercise the ordinary right as equity orders of the company. So there will be no change. There will be the presence of an independent expert appointed by the company Chamber of Commerce and these procedures aims to reach mutual agreed solution with all the order to facilitate the process of turnaround. So to give you a brief summary, the target of this procedure that, as mentioned, is totally voluntary and out of the card is to protect the group industrial and commercial value, to strengthen the crew financial structure, improve our operational efficiency and cash generation. And again, it's important to reiterate that the company will continue to operate normally. There will be full continue in our industrial and commercial activity as well in our relationship with clients, suppliers and employees. So this was extremely important because like we did introduce in our press release. So now I will leave the floor for questions.

[Operator Instructions] And if there are no questions at this time, I'd like to turn the floor back over for any further closing comments. There are no questions at this time. So do you have any further closing comments?

So from our side, we don't have any. I don't know if Mr. Natuzzi want to have final comments, but I want just to underline that we're always available for questions, and you can reach us out and we can arrange the phone call, so we can reply through e-mail, it's important that if there is any questions, we are ready here to reply from our side.

I agree with you, Carl. Thank you very much. And -- sorry, I mean, I would expect some questions just to clarify what we are doing and why we are acting in that direction. But certainly, we are working here as always and more than ever really to address this situation in the best way possible. This company has had years history. And we are planning to write down the next 6 history. So that's certainly is the intention and the determination that the management and myself, we have in this company. Thank you very much for listening to us, and thank you again. And let's be confident because this horrible situation around the world. We all hope that we will change and will really improve. Thank you again. Thanks a lot to everyone.

Thank you. That does conclude today's webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Thank you.

Thank you.