Natuzzi's Q2 2025 Earnings Call Unveils Key Contradictions in Asset Monetization, Trade Business Growth, Cost Management, and Personal Credit Line Terms

Date of Call: November 20, 2025

Financials Results

• Gross Margin: 34% (reported as 'last quarter at these volumes was only 34%')

Guidance:

• Board approved guidelines for a multiyear restructuring plan to optimize cost structure and increase flexibility.
• Founder extended a $15M zero-interest credit line to support short-term needs and restructuring execution.
• Company is evaluating capital-strengthening measures and monetization of noncore assets (total net asset value ~€70M; tannery previously valued ~€5M).
• Management's stated trajectory is to improve operational efficiencies, restore margins and return to profitability.

Business Commentary:

* Challenges in China and the US Markets: - Natuzzi S.p.A. experienced a decline in business due to challenges in China and the US markets. - In China, tariff issues and uncertainty have led to a significant drop in forecasted volume, with 77 Natuzzi Italia and Natuzzi Editions stores closed and 30 new stores opened. - In the US, tariff wars between the US and China have impacted sales and production, with the company shutting down its Shanghai factory and moving production to Italy.

• Restructuring and Cost Optimization:
• The company is implementing a multi-year restructuring plan to optimize costs and strengthen its capital structure.
• Pasquale Natuzzi, the founder and CEO, granted a personal credit line of $15 million with a 0% interest rate to support short-term needs.
• The company is also exploring opportunities to monetize noncore assets like the tannery, with a value of EUR 5 million, and other plants and machinery.

• Commercial Initiatives and New Projects:
• Natuzzi plans to develop the Trade and Contract business, with contracts in Dubai and Israel already secured for luxury residential projects.
• The company is attending various fairs and congresses to showcase new projects and raise brand awareness, including events in Milan, High Point, and Mumbai.

• These initiatives aim to stimulate interest in the brand and ultimately drive business growth.

• Gross Margin Improvement and Cost Efficiency:

• Natuzzi aims to improve its gross margin by addressing factors such as lower retail sales and operational efficiencies.
• The company is working on price adjustments and cost reductions to ensure sustainable profitability.
• Carlo Silvestri, the CFO, stated that the plan is to achieve profitability, with a trajectory to increase margins and decrease operational costs.

Sentiment Analysis:

Overall Tone: Neutral

• Management emphasized significant headwinds (China tariffs, US/EU tariff uncertainty), store rationalizations (77 closed, 30 opened in China), and a newly approved restructuring plan; management stated the plan's trajectory 'is to be profitable' while acknowledging limited near-term visibility.

Q&A:

• Question from David Kanen (Kanen Wealth Management LLC): You extended a $15M credit line — what are the terms? Can you quantify noncore assets and potential proceeds (e.g., tannery)?
  Response: Founder provided a $15M zero-interest credit line; company is seeking to monetize noncore assets but has no firm disposals yet — total net asset value ~€70M and the tannery's last valuation ~€5M; active review ongoing.

• Question from David Kanen (Kanen Wealth Management LLC): Can you quantify noncore assets in millions and, post-restructuring at current volumes, what gross margin and operating expense reductions do you expect — can you be profitable at ~$320M revenue?
  Response: CFO: total net asset value ~€70M (subject to further analysis), tannery ~€5M; management is targeting operational efficiencies and pricing actions to lift margins from current ~34% and reach profitability, but concrete margin/opex targets were not disclosed.

• Question from David Kanen (Kanen Wealth Management LLC): At these depressed levels, is the objective to be breakeven/profitable after restructuring?
  Response: Yes — management confirmed the restructuring plan's trajectory is to return the company to profitability.

• Question from David Kanen (Kanen Wealth Management LLC): On commercial (Trade & Contract) initiatives, what is your internal goal for annual run-rate revenue next year (e.g., $10M, $20M)?
  Response: Management: have signed contracts (e.g., Dubai, second Dubai contract, Israel) but cannot yet quantify run-rate; activity is at a start-up phase with low initial revenue and an expected multiplier effect over time.

• Question from David Kanen (Kanen Wealth Management LLC): For a typical building (e.g., 150 units), what is average spend per unit on furnishing?
  Response: Management: spend per unit varies widely by project, configuration and material (leather vs fabric); no per-unit estimate provided — company will average after completing projects.

• Question from David Kanen (Kanen Wealth Management LLC): Update on permanent CEO search — any near-term timeline or candidates?
  Response: Management engaged a headhunter and is screening candidates; seeking a CEO with high-end brand, retail and operations experience; search is ongoing.

• Question from David Kanen (Kanen Wealth Management LLC): Is Q3 tracking at Q2 levels, better or worse in terms of written orders?
  Response: Management declined to provide a new update on the call and directed investors to the press release for details.

Contradiction Point 1

Noncore Asset Monetization and Strategic Value

It involves differing perspectives on the strategic value and monetization potential of noncore assets, which are crucial for the company's restructuring and financial improvement.

Could you quantify the value of noncore assets, including tanneries and other properties, available for disposal as the company transitions to profitability? - David Kanen (Kanen Wealth Management LLC)

2025Q2: We are actively looking for opportunities to monetize noncore assets. - Carlo Silvestri(CFO)

Did the 10% price increase and moving production out of China cause the margin decline, and should we expect a return to the 38% level? - David Lawrence Kanen (Kanen Wealth Management LLC)

2025Q1: We did monetize some of them [noncore assets] to focus on others. - Antonio Achille(CEO)

Contradiction Point 2

Trade and Contract Business Potential

It highlights differing expectations regarding the growth and revenue potential of the Trade and Contract business, which is a strategic focus for the company.

What is your internal target for annual commercial revenue run rate in the Trade and Contract business next year? - David Kanen (Kanen Wealth Management LLC)

2025Q2: It's a start-up with low initial revenue, but there's potential for growth as more projects materialize. - Carlo Silvestri(CFO)

Can you update on the Commercial division's progress and potential size? - David Lawrence Kanen (Kanen Wealth Management LLC)

2025Q1: The trade business is growing, with some stores seeing up to 30% of sales from this segment. - Pasquale Junior Natuzzi(Chief Brand Officer, Chief Creative Officer)

Contradiction Point 3

Cost Management and Expense Sustainability

It reveals inconsistencies in the company's cost management strategy and the sustainability of reduced operating expenses, which directly impact profitability.

Can you quantify the value of noncore assets and the tannery? Post-restructuring, what gross margin and operating expense reduction can we expect? Will the company be positioned to be profitable as a $320 million entity? - David Kanen (Kanen Wealth Management LLC)

2025Q2: Provided revenue scale remains steady, we expect expenses to decrease as a percentage of revenue. - Antonio Achille(CEO)

Can you sustain operating expenses at EUR 27.4 million? - David Lawrence Kanen (Kanen Wealth Management LLC)

2025Q1: We have confidence in our cost management. We're reviewing all discretionary expenses and focusing on procurement. - Antonio Achille(CEO)

Contradiction Point 4

Provision of Personal Credit Line

It involves the provision of a personal credit line to the company, which raises questions about financial management and decision-making processes.

What are the interest rate terms for the $15 million personal credit line extended to the company? Can you quantify the noncore assets available for disposal, including their value and specific properties like tannery and other assets, as part of transitioning to profitability? - David Kanen(Kanen Wealth Management LLC)

2025Q2: The credit line is a 0% interest loan. - Carlo Silvestri(CFO)

Can you clarify the purpose and terms of the $15 million personal loan? Also, can you share insights on your asset mapping efforts? - Anthony Farhat (Jefferies)

2024Q4: In the last few days, I took a decision of providing a personal credit line for an amount of $15 million to the company, and I want to be very clear on this. This is a small amount, and it's a short-term relief for the company. And I want to be very clear that this is not a personal compensation to me. - Pasquale Natuzzi(CEO)