Natuzzi, S.p.A.

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Thank you for standing by. Welcome to the Natruzzi STA 4th Quarter 2025 Financial Results Conference Calling Webcast. As a reminder, if you'd like to join the conference call via telephone, please dial 1-412-717-9633, then passcode 39259. In addition to the link already provided. Once again, to join via telephone, please dial plus 1-412-717-9633, then passcode 3925-2103. At this time, all participants are in listening-only mode. Follow the introduction or conduct a question-and-answer session. Instructions will be provided at that time for you to join the queue for questions. Joining us on today's call as usual are Pasquale Nutritzi, Executive Chairman and Chief Executive Officer, Carlos Silvestri, Chief Financial Officer, and Piero Genzo, 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 Conference Call for the 2025 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 conditions. Please refer to our most recent annual report on Form 20F 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'd like to turn the call over to the company's chief executive officer. Please, Mr. Fruzzi.

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 environment. The market conditions we currently face require responsible, timely, and fractional decisions. 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 involves the reallocation of our low-margin Italian production capacity because it is no longer sustainable under the current Italian cost structure. Therefore, we are shifting this volume to other manufacturing facilities within the group, like Romania, for example, or could it be China, could it be Brazil, or could it be Vietnam, where we still have our manufacturing company. will involve rationalization of our Italian food factories, including our tannery and logistic centers. So that's primarily the plan we are working on and to go forward. So I ask Carlo, our CFO, eventually, you know, to comment something. And then obviously I'm available for any questions. Thank you.

Thank you, Mr. Latruzzi. 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 a 38.1 in fourth quarter last year, we did achieve 30.2% this year. The main reason that we did analyze stays also within the production shift that of certain for the U.S. market from the Chinese factory to the Italian factories. As you may recall, last year we did plan a shift with the goal of avoiding the trade tariffs. imposed by the U.S. administration for products manufactured in Asia. The subsequent trade tariff imposition also to the EU production has offset the benefits. And on top of that, we were 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 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 non-financial assets. If we 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 the goods edition stays in the lower direct retail of the sales coming from the retail channel compared to last year. and an unfavorable sales mix, we are seeing less Natuzzi Italia and more Natuzzi edition sold in the quarter. So as Mr. Natuzzi was mentioning, we are in the middle of the restructuring plan that aims to create sustainability in the medium and long term. So what we are doing is on the Top part, we are also continuing reviewing our price list to leverage and to recover from negative effects from US trade 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 17.1 million that you will find in our fourth quarter labor costs, 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 that our retail strategy will be the core of our business, we have booked a 4.4 million in permanent loss on our financial asset related to the retail operation, principally in Europe and in U.S. At the same, we did book in administrative expenses a 1.9 million accrual for repayment of non-financial assets compared to 500,000 booked last year. At the same time, the companies remained fully committed in reducing the cost of the overall structure in Italy and in some selected commercial subsidiaries, and the structures Let's say a strategy that is keep going 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 use 4.5 million But the most important thing is that we had the benefit from 2.5 million of our improvement of our working capital change that is mainly given by 13 million decrease in inventory level. So we are also focusing on this point to create value for the company, try to maximize our inventory and to decrease the stock, while we decrease our trade table as other liabilities. On top of that, it's extremely important that in our investing activities, the main, let's say, contributor has been the 9.9 million collected in connection with the completion of the sales of two non-strategic assets, namely the land in Romania for 2.4 million and the completion of the sales of Ipoint for 7.5 million. As Mr. Natuzzi was mentioning, the rationalization of our industrial process will bring us with some assets that we 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 be more efficient in this restructuring process. I'm not a legal person, but I would like to give you more clarity and more, let's say, information about this process because it's important that we have all clear information about these frameworks. The Board of Directors has granted Mr. Natuzzi to initiate a specific procedure under the Italian corporate law framework called Composizione Negoziata della Chiesa, CNC, so-called. And this will be confirmed because our submission will be, let's say, official in the coming weeks. What is the CNC? It's a voluntary out-of-court restructuring procedure. specific to Italian companies 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 operation under the guidance of the current management team and the shareholders continue to exercise their ordinary rights as equity holders of the company, so there will be no change. There will be the presence of an independent expert appointed by the competent Chamber of Commerce, and this procedure aims to reach mutually agreed solution with all the supporters 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 court is to protect the group industrial and commercial value, to strengthen the group financial structure, improve our operational efficiency and cash generation. And again, it's important to reiterate that the company will continue to operate normally. They will be full continued 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 first release. So now I will leave the floor for questions.

Thank you. If you'd like to be placed into question and queue at this time, open up the Q&A function. You could do so by using the Q&A part of your screen. Once again, if you do have any questions, please use the ask a question feature that's appearing on your screen now. One moment, please, while we poll for questions. Once again, ladies and gentlemen, if you have any questions today, you're going to see the ask a question feature on your screen. You may press that to ask a question, if so. One moment please while we poll for questions. We'll just stand by and see if anybody does have any questions, okay? And if there are no questions at this time, I'm just going to say I'm going to poll one more time and say if you have any questions, please use the ask a question feature on your screen. 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?

No. From our side, we don't have any. I don't know if Mr. Natuzzi wants 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 phone calls, or we can reply through email. It's important that if there is any question, we are ready here to reply from our side.

I agree with you, Carlo. Thank you very much. And sorry, I mean, you know, I would expect some question just, you know, to clarify what we are doing and why we are, I mean, acting in that direction. But certainly, we are working here as always and more than ever, you know, really to address this situation in the best way possible. This company has... history, you know, and we are planning to write down the next 57 years 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 us and thank you again. And let's be confident because this is a horrible situation around the world. We all hope that the world will change and will really improve. Thank you again. Thanks a lot for everyone, to everyone. Gracias.

Thank you. That does conclude today's webcast. Let me just connect your line at this time and have a wonderful day. We thank you for your participation today.

Thank you.