Natuzzi S.p.A. Q1 2026 Earnings Call - Italian Plant Closures and Romania Production Shift Target Margin Recovery

Daryl, Conference Call Moderator, Natuzzi S.p.A.: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Natuzzi S.p.A. first quarter 2026 financial results. Interested people can also join this conference call live by telephone by dialing the following number, 1-201-493-6703, then enter the passcode 39252103#, in addition to the link already provided to join via video. Again, as a reminder, you can also join this conference call live by telephone by dialing the following number, 1-201-493-6703, then enter the passcode 39252103#, in addition to the link already provided to join via video. At this time, all participants are in a listen-only mode. Following the introduction, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions.

Joining us on today’s call are, as usual, Pasquale Natuzzi, Executive Chairman and Chief Executive Officer, Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Carlo Silvestri, Chief Financial Officer, Piero Direnzo, Investor Relations. As a reminder, today’s call is being recorded. I would now like to turn the conference over to Piero. Please go ahead.

Piero Direnzo, Investor Relations, Natuzzi S.p.A.: Thank you, Daryl, and good day to everyone. Thank you for joining the Natuzzi’s conference call for the 2026 first 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 U.S. 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, 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. Now I would like to turn the call over to the company’s Chief Executive Officer. Please, Mr. Natuzzi.

Pasquale Natuzzi, Executive Chairman and Chief Executive Officer, Natuzzi S.p.A.: Thank you, Piero. Good morning, everyone, and thank you for joining us today. The results for this quarter 2026 are clearly disappointing and reflect a combination of external and internal factors that had significant impact on the group performance. On the external side, we continue to operate in a complex market environment marked by geopolitical instability, tariffs on sales in the U.S., an housing market at historically low levels and persistently weak consumer sentiment. In addition, the transfer of Natuzzi Editions production from U.S. market from China to Italy negatively affected the margin profile of this production line. This result confirmed the need to take decisive action on certain structural elements of the group. Our industrial footprint in Italy is currently oversized compared with the present sales volume and carriage cost level that are no longer sustainable.

For this reason, since the beginning of July, we have started executing a restructuring plan aimed at significantly reducing our fixed costs and improving overall efficiency. The plan is based on number of very concrete operational levers. First, we have initiated the transfer of Natuzzi Editions production for U.S. market from Italy to Romania. This initiative is designed to improve the industrial margin of this product line and consequently reduce the losses associated with this production. Second, we have rationalized our industrial operation in Italy, reducing the number of operating plants from five to two plants. This is a necessary step to eliminate the fixed costs that are no longer aligned with the current size of the business and to create the condition for economies of scale. Finally, we have already received expression of interest from 120 Natuzzi employees to participate in a voluntary exit program.

We are fully aware of the complexity of this phase and of the impact that the decision currently underway may have on our organization. At the same time, we believe that acting now with discipline and urgency is essential to strengthen the group economic sustainability, protect the competitiveness of the Natuzzi brand, and lay the foundation for the progressing recovery in margin. That’s the real situation as of today. If there are any questions, I would be very pleased to answer any kind of a question. Thank you very much for listening to me. Thanks.

Daryl, Conference Call Moderator, Natuzzi S.p.A.: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please click on the raise hand icon to ask your question verbally, and I will unmute your line at that time. Once again, you can click on the raise hand icon, and I can give you permission to unmute. As a reminder, if you’d like to ask a question, please click on the raise hand icon.

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Daryl, if you don’t mind, I can give some more color about the action that we are taking, to have more clarity on that. While waiting for questions, then we can give you a bit of more color in what we are doing as a management to recover from the situation. Maybe this can help in understanding better how we are facing all the issues. As Mr. Natuzzi has rightly underlined, we are taking several actions on this, but I would like also to give you people also what are the expectations on the action that we are taking. For example, when you talk about the relocation of production from Italy to Romania of the Natuzzi Editions for the U.S. market. If the question will come out, anticipate it.

The total volume of business is in the ballpark between EUR 30 million and EUR 40 million, that will give, according to our preliminary analysis, that, of course, will defer because it will be part by the actual product mix, will give us a 25% of that EBIT of that portion of business. This is action that we are taking into action and will impact, of course, the results in the second part of the year. The figures that I did mention before refer to the full year impact.

When we were discussing about the reduction of the 120 employees that have voluntarily, for the moment, signed an intention to participate in volunteer, that of course, has to be confirmed, meaning that the 120 employees will be, let’s say, not in our roster from the 1st of January 2027, and all the cash flow of this exit cost will be in 2027. In terms of cost advantages, a portion of our workforce cost today is already offset through social safety net measures and wage support program. The results of the saving achieved will depend on the level of plant utilization and on the extent of the social support mechanism for next year. This is important.

The main point of this initiative is that this is our first step to a more structurally efficient cost base, and will give not only immediate financial impact, but will improve operational flexibility, enhance productivity, and better align our workforce with the current future needs. On the same side, as a plan that is going through several years of dismissal of idle assets and offer for another plant, that has also a potential rehiring of 40 people because the objective remains the disposal of non-core assets. The process has also been designed with a strong focus on protecting employment. This is also something that the company is really evaluating. On the cost base, what I would like also to remind, start the downsizing of the top managerial structure.

For the moment, we have had the exit in U.S. and Italy of some executives that will bring saving in our cost structure base. On a side note, I would like to underline that the company is actively working. This is our work. We’re actually discussing with a place that may support us in the future. Thank you. May I would like maybe Pasquale Junior to add some on the commercial side, so to receive the full picture of what’s happening, and then leave the floor to the questions. Thank you.

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: I have had some issues hearing you sometimes. I hope you can hear me loud and clear. Do you hear me right?

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Totally.

Speaker 5: Yes.

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Totally. Perfect.

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: Good morning. Good morning, gentlemen and ladies. Thank you for attending this call and giving me the chance to introduce myself. I’d like to take a few minutes to update you on our commercial transformation, I would say, that we’ve launched over the past few months and the initiatives that are shaping Natuzzi’s future growth. I have joined as a Chief Commercial Officer shortly before Milan Design Week in 2026, in April, where we already there, back then, introduced one of our most important strategic initiatives, which is the Natuzzi Studio. Natuzzi Studio is a new retail concept designed to capture the growing opportunities within the trade, projects, and specification business. It’s clearly more than a traditional store. It was conceived, and it is conceived as an urban design hub where architects, interior designers, developers, and clients can collaborate with our teams on residential and commercial projects.

Clearly, the dimensions of these stores will allow us to be more capillary and be closer to these designers’ destinations, definitely more city-centric. This evolution is fully aligned with our premium luxury and clearly design-oriented positioning. From the very beginning, the organization experienced a renewed sense of energy and urgency since I started. The response of the Natuzzi Studio during Design Week exceeded our expectation, and several dealers already expressed interest in opening this new format. Speaking of retail expansion and retail formats, the expansion continues at a very healthy pace, I would say. During the first half of 2026, we opened already 26 new stores, following the 49 opened during 2025. These investments confirm our commitment to strengthening our global retail network, as well as the recognition from investors and dealers who see a great value in the Natuzzi brand.

In addition to that, with more modern and better-producing formats, we continue to optimize the distribution footprint by closing or relocating locations that no longer reflect the premium luxury positioning of the Natuzzi brand. At the same time, retail itself is changing. Across most markets, store traffic continues to decline at a double-digit rate, making it increasingly clear that relying solely on walk-in customers is no longer enough. For this reason, we are transforming our retail model from a traffic-driven business into a clienteling, outreach-driven organization. Our store manager and sales consultants are becoming design consultants and businesspeople, business developers, capable of generating opportunities not only inside the four walls of a store, but throughout their local markets by building relationships with architects, designers, developers, and of course, end consumers.

This transformation also extends to our headquarters, where we are evolving our commercial operations from a model primarily focused on organic order intake into one supported by targeted commercial initiatives and demand generation programs. Over the past weeks, we have introduced daily cross-functional meetings focused on commercial priorities, cash generation, and operational execution. Commercial operations and finance are now working as one integrated team with shared objectives on orders, revenue, deliveries, and cash flow. This new way of working has significantly increased alignment, speed of execution, and accountability across the organization. We have also launched several initiatives to reduce raw material and finished goods inventories through our targeted commercial programs with selected key accounts. The feedback has been encouraging, with customers recognizing not only the commercial initiative but also the improved coordination, responsiveness, and service level they are delivering.

In the U.S., our reorganization is placing strong emphasis on commercial urgency while accelerating clienteling initiatives to generate B2B and B2C opportunities beyond traditional store traffic. In China, we recently completed another successful road show alongside the opening of our flagship store in Beijing, where Mr. and Maestro Lang Lang came as an ambassador and supporter of this opening, as well as the ambassador of Italy in China. It was followed by a series of events with the local design community, the growing recognition, and the confirmation that Natuzzi among architects and high-end consumers of China is becoming more and more a point of reference and an icon of the industry.

In the U.K., we’re about to launch a major store refresh program across both Natuzzi Italia and Natuzzi Edition, which will upgrade not only visual merchandising and store display, but also will strengthen commercial momentum and store traffic conversion. Our contract business continues to build a strong international pipeline through relationship with developers, hospitality operators, architects, and specifiers. While geopolitical tension in the Middle East and India, two markets where we invested significantly over the last years, have delayed the closing and revenue recognition of some projects. By the way, these opportunities remain largely intact. At the same time, other regions are generating new opportunities that I honestly feel will help diversify and strengthen our global pipeline.

Although the market environment remains challenging, the first months of transformation have confirmed that a stronger commercial discipline, closer cross-functional integration, and a sharper market focus are creating the foundation of a sustainable and profitable growth. We remain confident that this initiative will strengthen Natuzzi’s competitive positioning and support long-term value creation for our shareholders. Thank you, and I’m available for your questions if you have some.

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Thank you very much, Gigi.

Daryl, Conference Call Moderator, Natuzzi S.p.A.: Again, if anyone does have any questions, please click on the raise hand icon, and we’ll give you permission to unmute your line and ask your question verbally.

Kirby Newberger, Analyst/Investor: Hello, this is Kirby Newberger.

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: Hi, Kirby.

Kirby Newberger, Analyst/Investor: PJ mentioned something about opening new stores. Where does the financing for the new stores come from?

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: I was merely referring to, and I tried to be clear on that, so sorry if I wasn’t fully. These are FOS, the so-called franchise store, which are stores opened by partners that are confirming how the Natuzzi brand, through their investment, is a brand with great value and strategic, I would say, alignment to their investment. These are financed by third parties who are heavily investing on the expansion of our store network.

Kirby Newberger, Analyst/Investor: Great. Thank you. That answers my question.

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: Thank you.

Daryl, Conference Call Moderator, Natuzzi S.p.A.: Okay. Once again, if you would like to ask a question and you have the ability to unmute yourself, please do unmute yourself to ask your question.

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: Of course, if there is any other question in any other day, we will be available to answer to any questions also coming in the next days.

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Do you speak to this or no?

Kirby Newberger, Analyst/Investor: No.

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Okay.

Kirby Newberger, Analyst/Investor: I’m still-

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Okay.

Daryl, Conference Call Moderator, Natuzzi S.p.A.: Thank you so much. I do appreciate all your time today. This does now conclude today’s Natuzzi conference. As Mr. Silvestri said, if you do have any follow-up questions, please feel free to reach out offline and they will be able to answer any questions that you may have. We definitely appreciate your time today, and you now may disconnect.

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Thank you.

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: Thank you.

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Thank you very much.

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: Thank you.

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Thank you, everybody.

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: Bye. Thank you.

Carlo Silvestri, Chief Financial Officer, Natuzzi S.p.A.: Bye-bye.

Pasquale Jr. Natuzzi, Chief Commercial Officer and Chief Product Division Officer, Natuzzi S.p.A.: Bye-bye. Thank you.

Kirby Newberger, Analyst/Investor: Thanks.