Natuzzi SpA :NTZ-US: Earnings Analysis: Q4, 2016 By the Numbers : May 8, 2017

Natuzzi SpA reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Natuzzi SpA – Flexsteel Industries, Inc., Select Comfort Corporation, Stanley Furniture Company, Inc. and Bassett Furniture Industries, Inc. (FLXS-US, SCSS-US, STLY-US and BSET-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 133.39 million, Net Earnings of USD 0.54 million.
  • Gross margins widened from 35.38% to 35.39% compared to the same period last year, operating (EBITDA) margins now 5.22% from 5.24%.
  • Year-on-year change in operating cash flow of 278.54% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating (EBIT) margins contributed to decline in earnings, despite some positive contribution from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 133.39 114.1 123.44 133.1 142.55
Revenue Growth (%YOY) -6.42 -11.01 -6.66 -1.94 -16.82
Earnings (mil) 0.54 -6.15 -0.9 -0.22 1.95
Earnings Growth (%YOY) -72.52 -8.3 76.88 97.97 110.23
Net Margin (%) 0.4 -5.39 -0.73 -0.17 1.37
EPS 0.01 -0.11 -0.02 -0 0.03
Return on Equity (%) 1.3 -14.43 -2.06 -0.5 4.38
Return on Assets (%) 0.58 -6.51 -0.92 -0.23 2.03

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Market Share Versus Profits

Revenues History
Earnings History

NTZ-US‘s change in revenue this period compared to the same period last year of -6.42% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that NTZ-US is holding onto its market share. Also, for comparison purposes, revenues changed by 16.91% and earnings by 108.70% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from 5.24% to 5.22%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 35.38% to 35.39%. For comparison, gross margins were 33.63% and EBITDA margins 2.16% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

NTZ-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 58.71 days from 66.37 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

NTZ-US‘s change in operating cash flow of 278.54% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings fell, largely because of the narrowing in operating margins, which decreased from 2.73% to 2.41%. The decline in earnings probably would have been worse, were it not for some one-time items that improved pretax margins from 0.99% to 2.33%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Natuzzi SpA engages in the design, production and marketing of contemporary and traditional leather and fabric upholstered furniture. Its main products include sofas, armchairs, home furniture, and home accessories and are categorized into the following product lines: Natuzzi Italia, Natuzzi Editions, Natuzzi Revive and Private Label. The Natuzzi Italia line has a selection of home furnishings, lamps, accessories, and living room furniture. The Natuzzi Editions line offers a wide range of leather sofas. The Natuzzi Revive line specializes in the manufacture of performance recliners. The Private Label line manufactures sofas for the mass market occasionally sold under the Softaly brand. The company was founded by Pasquale Natuzzi in 1959 and is headquartered in Santeramo in Colle, Italy.

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