Natuzzi S p A : 4Q2020 Financial Results

NATUZZI ANNOUNCES CONSOLIDATED RESULTS FOR THE

FOURTH QUARTER AND FULL YEAR 2020

• 4Q2020 INVOICED SALES AND OPERATING PROFIT IMPROVING
• ORDER BACKLOG STILL AT HIGHER THAN USUAL LEVELS
• SIGNED A PRELIMINARY AGREEMENT TO DEVELOP BUSINESS IN THE REST-OF-APAC REGION

Santeramo in Colle, (BA), April 6, 2021 - The Board of Directors of Natuzzi S.p.A. (NYSE: NTZ) ("Natuzzi" or the "Company") approved today its 2020 fourth quarter and full year unaudited consolidated financial results and the Company's draft stand-alone financial statements. The stand-alone financial statements of the Company for the year ended December 31, 2020 will be approved by the Company's shareholders on a meeting to be held on first call, on April 30, 2021, or, on second call, on May 7, 2021.

UPDATE OF COVID-19IMPACT ON THE GROUP'S OPERATIONS

During the fourth quarter 2020, a new wave of the pandemic around the globe has negatively affected our operations, mainly due to supply chain and logistic disruptions, in addition to the closures of points of sales, following the lockdown measures adopted by different public authorities, particularly in Europe.

Despite this scenario, the consumers' attention on the home, that has started in June last year, has continued to sustain the level of demand for our products also in the fourth quarter of 2020.

However, the global supply-chain system was unable to cope with the strong rebound in requests from industry, resulting in a limited or volatile supply of components, semi-finished goods and raw materials, as well as upward trending prices.

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Furthermore, especially for overseas routes, we have experienced a disruption in shipping, that has led to an increase in price for carriage, as well as caused an extension in delivery times for our products.

These combined effects are behind the current high level of the backlog.

The Group has responded to the trend in the order flow by gradually speeding up its production, in compliance with the virus-containment measures in Countries where we operate. While we were able to ramp up the rate of our operations in China and Romania, a high degree of absenteeism due to the pandemic has limited, so far, the potential of the Italian operations to run at the planned level.

Year-to-date, order flow from USA is still strong, whereas the performance in Europe is suffering from lock-down measures.

Despite the current level of backlog, we remain cautious about the prospects of the business environment in the near future, also in consideration of the inhomogeneous speed of the vaccine coverage in different countries, which could foster further uncertainty to the industry as a whole.

FOURTH QUARTER 2020 RESULTS

Consolidated net sales for the fourth quarter of 2020 were €99.9 million, down 0.6% from €100.6 million reported in 2019 fourth quarter. At constant exchange rates, consolidated net sales would have been up 3.5%. As anticipated, the difficulties of our suppliers in providing us with the requested production inputs as well as the limited availability of shipping containers have curbed our ability to add further deliveries within the fourth quarter of last year.

Considering the Group's core business only (upholstery, accessories and home furnishings), net sales were €95.4 million, 0.3% lower compared to last year fourth quarter, as a result of the 0.8% increase in the Natuzzi branded invoiced sales and a 6.3% decrease in Private Label.

Other sales were €4.5 million.

The 0.8% increase in the Natuzzi branded revenues was the result of the 1.0% increase in the EMEAI region, the 5.4% increase in the Asia-Pacific region, partly offset by the 2.6% decrease in the Americas.

Natuzzi branded invoiced sales, that are generated by both our direct retail network (Directly Operated Stores, or DOS, and concessions) and third-party operated points of sale, were €81.8

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million and represented 85.7% of the Group's core business, versus 84.8% in the fourth quarter of 2019.

The Group directly operates 54 mono-brand DOS, of which 38 Natuzzi Italia, 14 Divani&Divani by Natuzzi stores and 2 new Natuzzi Editions, plus 11 concessions in Mexico.

During the fourth quarter of 2020, direct retail sales were €15.8 million, down 6.4% versus the same period of 2019, mainly as a consequence of the closure of points of sales following the adoption of lockdown measures in different Countries, particularly in Europe and Mexico. Accordingly, sales generated by the Group's direct retail network represented 16.6% of core business compared to 17.7% in 2019 same period.

The Natuzzi division also includes sales generated by third-party operated mono-brand points of sales (franchised operated stores, or FOS, and galleries). Such sales were €66.0 million in 2020 fourth quarter, up 2.7% compared to the prior year fourth quarter, as a result of the 4.5% increase in the EMEAI region, the 5.4% increase in Asia-Pacific region, partially offset by the 1.8% decrease in the Americas.

Invoiced sales generated by the unbranded division, addressing the mass-merchant distribution, were €13.6 million, down 6.3% compared to 2019 fourth quarter. While sales from the EMEAI and APAC regions delivered a double-digit growth in the fourth quarter of 2020 (+34.7% and +30.2%, respectively), unbranded sales from the Americas, entirely served by our operations in Asia, were penalized by the shortage in shipping containers and limited availability of some raw materials.

The gradual increase of the outsourced production in Vietnam of unbranded products for the North American market continues. We expect to serve most of our mass-merchant distributors located in North America through such Vietnamese outsourced production by the end of this year.

4Q2020 GROSS MARGIN

Fourth quarter 2020 consolidated gross margin was 31.4%, vs 31.9% in 2019 same quarter and included €1.0 million of incentives to reduce redundant workers at the Italian operations. Net of such incentive, gross margin would have been equal to 32.4%.

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During the fourth quarter the Group benefitted from the adoption of COVID-related temporary public measures to lower the labor costs, a favorable product mix, and lower fixed costs thanks to the rightsizing of the Chinese manufacturing plant.

The Company is experiencing an increase in the price of raw materials and such inflationary pressure is expected to continue.

4Q2020 OPERATING EXPENSES

Operating expenses, which include Selling, Administrative, other operating income/expenses and the impairment of trade receivables, were €29.0 million (or 29.0% on revenues), decreasing significantly from €35.0 million (or 34.8% on revenues) in 2019 fourth quarter.

The reduction in the quarter was attributable to adoption of temporary COVID-related public measures to lower the cost of labor and rent-related concessions. In addition, the Group incurred in lower custom duties, for products manufactured in China and delivered mainly to the North American market and obtained COVID-19 grants from the US government (€1.3 million).

During the quarter, no impairment on credit receivables was accrued, whereas €1.1 million were accrued in fourth quarter 2019 for expected credit losses.

The management continued to cut operating expenses (such as fairs and travel expenses for a total saving of €0.6 million).

As anticipated, during the quarter transport costs started to arise (+€0.8 million versus same period of 2019), mainly as a consequence of the limited availability of shipping containers worldwide.

4Q2020 RESULTS

The Group reported an operating profit of €2.4 million, versus an operating loss of €3.0 million in 2019 fourth quarter.

Depreciation and amortization in the quarter accounted for a total of €5.4 million (vs €7.4 million in 4Q2019).

Net Profit deriving from the 49% share of the Chinese commercial partnership vehicle was €0.5 million.

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Loss for the period was €3.6 million, including a withholding tax accrued to move cash from our Chinese dormant subsidiary which will be liquidated.

FULL YEAR 2020 RESULTS

Consolidated net sales for 2020 were €328.3 million, down 15.1% compared to 2019, mainly due to the disruptive effects of the pandemic on our operations.

Considering the Group's core business only, net sales were €313.5 million, down 15.0% compared to 2019, as a result of the 9.5% decrease in sales for the Natuzzi division and the 37.2% decrease in sales for the Private Label business.

Non-core sales were €14.8 million.

Gross margin in 2020 was 31.4% versus 29.7% in 2019.

The Group reported an operating loss of €10.6 million in 2020 versus an operating loss of €22.5 million in 2019.

In 2020, net profit deriving from the 49% share of the Chinese vehicle was €1.5 million.

The Group reported a loss for the period of €24.9 million, versus a loss of €33.7 million in 2019.

As of December 31, 2020, cash and cash equivalents in the statement of financial position were €48.2 million, compared to €39.8 million as of the end of 2019.

The Group's net financial position before lease liabilities (defined as "Cash and cash equivalents," less "Bank overdraft and short-term borrowings," less "Current portion of long-term borrowings" and less "Long-term borrowings") was positive at €0.9 million compared to -€2.8 million at the end of 2019.

During the twelve months ended December 31, 2020, net cash provided by operating activities was positive at €12.3 million, versus €4.7 million in 2019.

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