Italian upholstery manufacturer Natuzzi has reported an increase in sales during its first quarter.

According to its latest trading update for Q1 2022, total sales amounted to €118.5m, an increase of 16.8% from €101.5m in Q1 2021.

Excluding “other sales” of €4.7m, Q1 2022 invoiced sales from upholstered and other home furnishings products amounted to €113.8m, an increase of 16% compared to Q1 2021.

Natuzzi said pre-tax profit for the period resulted at €1.8m, down from its profit of €6.7m year-on-year.

The group added that second quarter trading is likely to be impacted by the ongoing situation in China, where Covid-19 restrictions have been in force at its Shanghai facility since the beginning of April 2022.

The same restrictions have also resulted in the closure of 18 points of sales in the Shanghai district, whose sell-in contribution to the Group is ‘not significant’, as they represent less than 1% of the consolidated revenue.

Natuzzi China, located in the Shanghai district, is the Group’s factory that manufactures upholstery products for the APAC and North American markets. This factory, under standard condition, can generate about €8m on average of revenue per month. In 2021, 26.2% of the consolidated revenue of upholstery furniture come from Natuzzi China. The stop in production of Natuzzi China does not relate to the Company’s Natuzzi Italia brand, which is completely manufactured in Italy.

“Following the improvement in the general sanitary conditions, our representatives of Natuzzi China were informed by the local authorities that, starting from the beginning of May and after meeting certain sanitary conditions, a limited number of workers, initially about 20% of the entire Natuzzi China workforce, recently incremented to about 30%, were allowed to return to work so to resume operations in the factory, currently at about 30% of its production capacity,” Natuzzi said.

“From June 1st, 85% of workers will be allowed to return to work, thus enabling our Shanghai factory to increase its operational rate. Still, we expect the Group’s revenue for the quarter beginning in April 2022 to be significantly affected.

“The Group has started evaluating alternative solutions to manufacture written orders by leveraging on our global industrial footprint or external producers, such as our partner in Vietnam, even if we are aware that it takes time to adjust the supply and logistics aspects accordingly.”

Furthermore, Natuzzi revealed plans to enhance its Vietnamese factories following its recent partnership agreement with Truong Thanh Furniture Corporation (TTF).

Antonio Achille, CEO of the Group commented: “We continue executing on our transformation of the Group into retail and brand. With the aim to accelerate the commercial expansion of the Natuzzi brands in the Rest of APAC region, a market with attractive opportunities for us, we recently signed a partnership with a leading listed Vietnamese company in the furniture sector, that acquired a 20% stake in our subsidiary, Natuzzi Singapore, for a total cash consideration of USD 5.4 million.

“We are firmly convinced that we will benefit from joining forces with our partner, not only in the Brand/Retail business but also in the contract segment. With our partner we are also exploring ways to increase our production capabilities in Vietnam.”

Pasquale Natuzzi, Chairman of the Group, added: “The demand of our branded products in the first quarter has been robust. At the same time, the context around us invites to be extremely prudent. Generalised inflation, persisting supply-chain disruptions and the conflict in Ukraine provide multiple challenges to our supply chain. Recently, we saw the consumer developing a more prudent attitude.

“Our CEO and the management team are constantly monitoring the overall situation to navigate through these challenging times. The recent approval of a new incentive stock-option plan as well as the appointment of an independent Director, Gilles Bonan, former CEO of Roche Bobois with more than 20 years of experience in the furniture sector, demonstrate our determination to create a stronger governance and a committed management to reach our long-term goals.”