Insight: Italian home base hampers sofa king Natuzzi
By Francesca Piscioneri
SANTERAMO IN COLLE, Italy (Reuters) - From this hilltop town on the heel of Italy's boot, Pasquale Natuzzi has built an eponymous furniture company that is one of the country's most global brands. It sells sofa beds from Dallas to New Delhi and is one of a handful of Italian companies listed on the New York Stock Exchange.
Yet today, Natuzzi's home base is dragging it down. Best known for its brand Divani & Divani, the company hasn't made a profit in six years. In the first nine months of 2013, it lost 38.7 million euros, deepening year-on-year losses on a slight dip in sales to 328 million euros.
Though it sells in 123 countries, and has factories in China, Romania and Brazil, Natuzzi says the main reason for his company's woes is the high cost of making sleek sofas and armchairs at home.
The core of its production and half of its 6,500 worldwide employees are in Italy where high labor costs and strict employment laws make it hard for companies to keep up with more nimble competitors elsewhere.
It costs Natuzzi up to 10 times more to make a product in Italy than in its factory in China and although it has been proactive opening factories abroad is under pressure from Italian unions to keep jobs at home.
The result is that, as the recent economic downturns have hit Natuzzi's key consumer markets of the U.S. and Europe, the company hasn't been able to adjust its cost base to compensate for the fall in consumer spending.
"The orders we have are enough to employ 1,500 people, not our 3,200," the 73-year-old Natuzzi, who is company chairman and chief executive officer, said in a recent interview in Milan where he was unveiling the new Revive armchair.
Late last year, Natuzzi agreed to a government-brokered plan that will allow the company to avoid laying off more than a thousand workers, while pledging 242 million euros to breathe new life into the company's Italian operations. Continued...