Natuzzi S.p.A (NYSE:NTZ) Q2 2019 Earnings Conference Call - Final Transcript

Sep 30, 2019 • 10:00 am ET

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Natuzzi S.p.A (NYSE:NTZ) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to the Natuzzi's Second Quarter and First Half 2019 Conference Call. [Operator Instructions] Following the introduction, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for question.

Joining us on today's call are Natuzzi's Chief Executive Officer, Mr. Pasquale Natuzzi, the Chief Financial Officer, Mr. Vittorio Notarpietro, Mr. Oscar Severi, Global Strategy and Finance Development Director; and Mr. Nazzario Pozzi, the Chief Commercial Officer; Mr. Gianni Tucci, Chief Commercial Officer Key Account Private Label; and Piero Direnzo, Investor Relations. [Operator Instructions]

I would now like to turn the conference over to Piero. Please go ahead, sir.

Executive
Piero Direnzo

Thank you, Sandy, and good morning to all our listeners in the United States, and good afternoon to those of you connected from Europe and Asia. Welcome to the Natuzzi's second quarter and first half 2019 conference call. After a brief introduction by the CEO and CFO, we will give room for the Q&A session. Mr. Pasquale Natuzzi, together with the top management team will be glad to answer your questions.

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 20-F filed with the SEC for a complete review of those risks. The Company assumes no obligation to upgrade or revise any forward-looking matters discussed during this call.

And now, I would like to turn the call over to the Chief Executive Officer. Please, Mr. Natuzzi.

Executive
Pasquale Natuzzi

Thank you. Good morning to everyone. As you know, last month, we informed you about a general worsening in the global trade environment, and more recently the further escalation in the trade dispute between the United States and China.

These external factors, in particular, the current 25% due to tariffs, that will become probably 30% in a few weeks, have hurt our performance. Despite this worsening environment, we have activity reacted with an important efficiency improvement in our industrial operation with the implementation of a specific action.

Consolidated net revenue decreased by 10.6% over the first semester of 2018. Last year these numbers included our retail business in China, which is now reflected as our 49% of our joint venture. After adjusting for this change, sales for the period would have decreased by 7.6%. Vittorio will give you more detail on this.

As business condition gets tougher and consumer tastes are changing, we are performing significant changes in our model. We are continuing to implement the manutailer strategy that is a manufacturer and direct retailer of our product, making a change to how and where we manufacture.

Tariffs cannot be fully absorbed in our price. As such, we are revising the existing value chain and streamlining the process, structure, and operation, extending our Natuzzi-branded distribution and retailer operation