Natuzzi SpA (NTZ) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Natuzzi second quarter 2011 earnings call. As a reminder, today's call is being recorded. For opening remarks and introductions I will turn the call over to Silvia Di Rosa. Please go ahead, ma'am. Miss Di Rosa, please go ahead.

Good day and welcome to Natuzzi conference call. With us in our conference call today are Pasquale Natuzzi, Chairman and CEO; Vittorio Notarpietro, CFO; Giuseppe Clemente, Chief Operations Officer; Cosimo Cavallo, Chief Editions Brand Officer; Simon Hughes, Chief Natuzzi and Italsofa Brand Officer; and for the first time [Renee Bernhard], Chief Officer of Corporate Communications.

The CFO will review the second quarter and first half 2011 results. We will then open the call to your questions. You should have received an email copy of Natuzzi's earnings results. If not, you can find the information at the Natuzzi website, www.natuzzi.com.

Before proceeding, please be advised that the discussion today could contain certain statements that constitute forward-looking statements under the United States securities laws. Obviously, actually results may differ materially from those in the forward-looking statements because of risks and uncertainties that can affect our results of operations and financial condition. We have the risks and the uncertainties which have in the past affected and might continue to affect our results of operations and financial condition in annual report on Form 20-F for the fiscal year ended in December 31, 2010. This report is readily available on our website at www.natuzzi.com or from us upon request. You may also obtain a copy of our form 20-F actually from the United States Securities and Exchange Commission.

So now I will pass the call to Vittorio Notarpietro, the CFO of the Natuzzi Group.

Good morning to everyone. Thank you for joining us today to comment on Natuzzi's second quarter and first half results of 2011. Before commenting the most significant numbers of the second quarter 2011, let us give you the entire picture considering the entire first semester of this year.

Key numbers of the first half, sales went down by 10.8% even considering an increase in accessories sales. But first, under constant exchange rate, the slowdown would have been of 9.7%.

Second, such reduction comes from a very different performance between Natuzzi brand and all other brands. Natuzzi recorded a minus 4.2%, other brands minus 19.4%.

Third, Natuzzi lost sales in a few European countries, mainly Italy, Spain, Belgium, France and UK. In other areas, business is growing.

Fourth, other brands declined mainly in North American markets which sales were affected by the relocation of the Chinese plant. Up to March 2011 we were improving month by month our service level. The relocation of 1,400 people far from the existing factory led to strikes, no production at all for 10 days and delays in shipping for weeks. Many workers left and we had to replace them with new people with lower productivity. Delivery times increased even if we moved a portion of those orders in our Romanian and Italian plants facing additional extra cost. Today, those problems have been solved, so service and quality are again improving week by week.

We know that worldwide economy and consumptions are what they are, but we prefer to start from ourselves focusing on what we have already done and currently doing to face the difficulties of the market. In this regard, focusing the analysis on the entire product offering and commercial process, our activities follow two main paths. We are introducing new models at the so-called entry price level in order to favor traffic in stores and following the IKEA model we developed a sales strategy devoted to the key accounts.

Thanks to this strategy we were able to successfully approach some of the biggest players in Europe; UK, Harveys and Reid of the Steinhoff Group, BHS and more recently DFS. In France BUT, in Germany and Austria Begros and Krieger, in Norway Bohus, in USA Rooms To Go and Macy's, in Brazil Magazine Luiza, just to mention a few. My colleagues here will certainly elaborate on that.

Let's say also that Brazil, which is strategic for us, improved its performance with double digit higher sales thanks to a new management structure and a strategy focused on key accounts.

Let's now analyze the most important items of the income statement for the second quarter of 2011. Total net sales decreased by 16.4% versus the second quarter of 2010. Under constant exchange rate the decrease would have been 13.6% in the quarter.

Upholstery net sales decreased by 19.3% as compared to second quarter of 2010, as a combined effect of the decrease in volume partially due to the issues in the Chinese plant and the negative impact of the euro/dollar exchange rate.

Breakdown of upholstery sales by brands, net sales increased from -- Natuzzi, sorry, Natuzzi brand sales increased from 39.5% in second quarter 2010 to 44.6% in second quarter of 2011, while all the other brands had a reduction as a percentage of sales from 60.5% in 2010 to 55.4% in second quarter of 2011.

Second-quarter sales were flat versus 2011 first quarter, EUR105.4m in the first and EUR105.6m the second quarter but with a different contribution by brand, as I said before. Even in a difficult quarter like this, China with Natuzzi brand showed an increase of 87% and an improvement of 60% in all other brands.

In Europe, with an overall performance of minus 19.4%, we highlight the positive performance of Germany with a plus 11% on Natuzzi and with a plus 32% on all other brands due to the rationalization of the distribution started last year.

In the Americas, we had the most significant decline with a minus 25.9%. This decrease is mainly due to a decrease in Canada on both the Natuzzi and all brands, respectively 19.5% and minus 40%, and in the United States of America that reported a minus 29% on other brands, but on the contrary we had a positive plus [12%] on Natuzzi brand. We can certainly say that results were negatively impacted by the relocation issues experienced in China as said before.

Other sales, including sales of raw materials and accessories had an overall improvement of 10% as compared to the second quarter of 2010. Cost of goods sold on net sales increased from 62.4% in second quarter of 2010 to 66.6% in second quarter of 2011.

Let's go through key facts. Consumption costs were unchanged as a percentage on net sales. Even with increased cost of raw materials they were stable thanks to the higher contribution to total sales of the Natuzzi brand.

The higher incidence of transformation cost, I mean cost of labor and industrial costs, was due to labor cost increases in China, up 15%, and Romania, up 8% on lower sales, and to the lower efficiency in the Chinese new plant already mentioned deriving from the moving and massive new hiring. In fact, in spite of incentives, we moved 1,400 people but we lost 20% roughly of the existing workers which decided to leave instead of moving to a new location far from the existing one. This caused a lower productivity.

Selling expenses, freight costs had a significant improvement both in absolute terms, minus EUR2.8m, and in percentage on net sales from 9.3% in 2010 to 8.8% in 2011 due to lower transportation prices of some trade routes and to a different geographic mix of sales.

Commissions that we paid to agents also decreased by approximately EUR1.3m and 0.7% as a percentage on sales, again thanks to a different geographic mix in sales.

Advertising costs had a decrease of EUR1.5m as compared to the second quarter of 2010. SG&A expenses, I mean overhead expenses, improved in absolute terms by EUR0.6m but worsened as a percentage on sales that passed from 20% in 2010 to 23.5% in 2011.

For the above mentioned reasons, EBITDA amounted to a minus EUR0.5m in the second quarter of 2011 against a positive EUR8.2m in the second quarter of 2010 as a result of deterioration in margin, which reported a loss -- EBIT reported a loss of EUR5.5m in the second quarter 2011 compared to a positive margin of EUR2.3m in the same period last year.

Other income amounted to a positive EUR17.7m and includes extraordinary net income deriving from the compensation received from the Chinese authorities, minus the write off of existing assets, extraordinary relocation costs, example given the above mentioned incentive we pay to convince workers to move into the new plant, and some devaluation of long-lived assets.

Taxes declined by EUR2.7m thanks also to tax loss carry forwards in Italy.

Finally, the net results of the Group for the second quarter of 2011 recorded a positive result amounting to EUR9.6m versus a negative result of EUR2.8m in second quarter of 2010, thanks to the extraordinary income described above.

Let's now comment on the balance sheet figures. Net financial position boosted from EUR45.6m as at December 2010 to EUR61.6m in second quarter 2011. The Group registered a significant improvement on cash and cash equivalent which totaled EUR76m in Q2 2011 versus EUR61.1m as at December 2010 thanks to the payment by Chinese authorities of CNY420m for the relocation of the Natuzzi factory in China. Then, the Group spent almost EUR12m for investments mainly related to the new plant.

Net working capital went up EUR13m or 12.6% from EUR103m to EUR115m versus December 2011 -- December 2010, mainly due to the increase of the inventories associated with lower sales and prepayments to Chinese suppliers for investment in the new plant. The improvement in the overall efficiency of the Chinese plant will have positive effects also on working capital.

We understand that results coming from all the activities mentioned before for Natuzzi brand and key accounts will produce effect next year, also due to the very difficult economic environment in many countries where we operate. 2011 full-year sales results will be in the area of EUR500m, showing a decrease versus last year.

As far as profitability is concerned, we should have in Q3 and Q4 this year some increase in sales versus the first half of this year, so some more contribution on EBIT versus today's numbers. Then some costs related to the relocation will disappear and the productivity in that important new plant should increase from Q1 and Q2 level.

Still in comparison with 2011 first semester, we'll spend some more money for advertising, but at the same time we should display lower commercial cost, for example, sales and labor. All in all, the EBIT of the second half of 2011 should be much better than the one recorded in the first half.

Thanks to everybody. Now we are ready to answer your questions.

Thank you. (Operator Instructions). And we'll hear first from (inaudible).

Hello, hi, gentlemen. Could you give some additional background on what happened in Europe, because now Germany is doing very fine but the other markets are down significantly? Could you give some additional background on that?

(technical difficulty) by brand, because talking about overall -- okay, Simon, our Brand Director for Natuzzi and Italsofa will give some explanation about Europe.

Hi, Matt, Simon here. We, as Vittorio mentioned, we have five markets in Europe which drag the performance of the European business down, Italy, Belgium, Spain, UK and France. There is no holistic reason why they're all down. Each country has a different reason.

If you take the rest of the world, the store growth is very impressive. This year we'll open 60 new galleries and over 25 new stores, but very little of that store development is in Europe. So the Natuzzi brand really is a brand of two businesses, a fast-growing international business and a challenging European business.

And what are the actions you are taking in Europe to improve that?

A number of the countries, as I've mentioned before, each country has a different reason. One of the countries that has been questioned before has been Spain. I've spent 10 days going through every store in Spain and we are very clear on what we need to do in terms of turning that market around.

Italy is a more long distance view. I'm sure you read the same news as we do, but that's something that we'll focus on, on the long term. The business is too big in Italy to make any rash decisions.

Belgium is over-distributed; it's almost as simple as that. The UK is more a question of timing for Natuzzi. It's -- we've opened two stores this year, one in Harrods, one in Tottenham Court Road, which are performing well. But the rest of the UK outside London is weak.

One market which I didn't mention but should give some positive thought is Australia. We had our biggest account from Australia, David Jones, here two weeks ago who told us that the furniture in David Jones was down 15% and Natuzzi was 1% ahead of last year.

So I think the summary of the Natuzzi brand again is a business of two different businesses, a growing international business and a challenging localized European business.

Okay. Could you also comment on the sales over the last couple of months per region and say the order intake per region, how is that developing?

May I answer to your question for the brand Editions first? This is Cosimo Cavallo in charge for the Editions brand. The question is I suppose valid for the brand also for Europe, but then I come back to you also for the last two months in terms of order flow.

Overall, the Editions the performance along with the [Sofa Italy] brands has been, let's say, impacted mainly in the UK from one customer. That is the first half of last year was around one that is Harveys, Reid of the Steinhoff Group that for our services we have been stopping the business for six months, now is back on board and we are already distributing 160 stores, several more are starting three weeks ago.

So, mainly the shortfall has been recovered, Harveys was one of the main elements. If we did that Harveys, El Corte Ingles in Spain that shipped as a special promotion, [is consumed] in the second half of the year is another EUR1m that was missing. Overall, if we did that those three customers we should end up to almost even year-to-date week 37.

So the trend -- the trend in the second half of the year is basically much better due to the fact that if we had several actions implemented; one is that Milan Fair and the congress that means the Home Fair that lasts three months and the benefit we'll see mostly in the last quarter of last year.

Along with this we have to mention also for Editions that we are building a strong platform of gallery points all over the world. As of today we have a total 237 galleries while last year to date in June were almost nothing, because we need to deliver the display system along with the goods.

Okay.

[Mats] you had a question I think around Natuzzi in terms of a very light forward view. I would suggest it's quite difficult to read, but the numbers are probably looking no better than similar to last year.

Okay, but certainly also not weaker than last year?

The key trading environment in Europe is now through till October and November, and given that we have a heavy weight European business it's a little bit too early to comment.

In terms of the rest of the world the sales of the goods because we are opening all the new galleries, but the reality is it's still a smaller proportion of the business from Europe.

Okay.

Caller, is there anything further?

I was just -- I will just wait for some additional questions from other listeners and then I might come back.

Thank you. (Operator Instructions). We'll hear next from Flavio Cereda with Bank of America Merrill Lynch.

Hi, good afternoon. Two quick questions really, firstly looking at the North American market can you tell us the degree to which you've been successful at penetrating some of your former accounts. I remember it was something that you were highlighting towards the end of last year as a project that you had over the next coming two, three years to post back to the customers that you had for different reasons lost in recent times.

And secondly, maybe for Vittorio, if trading conditions remain difficult for the next couple of years as is likely to be the case, specifically not for yourselves but generally, on the working capital front and specifically on inventories are you comfortable that you are equipped to deal with these kind of conditions? I know it's an awkward question, but just have a sense of what your forward thinking is in this respect. Thank you.

Yes. This is again Cosimo Cavallo. One- -- several action has put in place to recover the customers that we have in North America still are ongoing. I just can mention the last (background noise) I had in North America in the last two weeks. We've been going through the top, let's say, 34 customers have been visited across the top 50 just to make sure that we deliver the right product proposition along with a strong marketing activity, and with a strong display system as far as concerned Natuzzi Editions.

Okay, Macy's is one of the customers we report with a strong focused program in terms of -- I would say that is a very long-lasting relationship and a strong partnership where we have been working in (background noise) and with the customer with a very focused program. And the same we are doing increasing a little bit more, let's say, focusing the key account.

This is one of the elements of course, and the market, next market we are preparing also very, let's say, solid, I would say collection okay, and that's one of the major actions we are having.

I can mention many customers, (inaudible) Furniture [Deal] at Macy's, Copenhagen, Sofa Mart, (inaudible), Sears, all those customers are under let's say, special monitoring that we want to make sure that we understand that quick, let's say, reaction of the market. And we are in line with this.

Hi, Flavio, this is Vittorio. As far as working capital is concerned I feel comfortable with trade receivables, absolutely. And at the same time we experienced by the end of this quarter an increase in inventories. You are right. And working capital is something that we have to check day by day, because cash is king also for us.

But analyzing numbers in working capital, the only let's say issue is in inventories, which is really linked to the Chinese issues in recent months because we lowered our production there but we still have -- still continue to buy in order to be ready for the new production as soon as the production has been restored.

So I think that numbers are improving. Starting from July inventory levels will come back to a more normal level, obviously the faster will be delivered from China the lower will be the working capital in China.

But let me also say that inside the company there is working -- there is a job that we are doing regarding the reduction of complexity. And the higher will be the level of this reduction of complexity the lower will be the working capital again. And since I have seen -- I have been seeing some very important steps in this direction for the future, I'm more than comfortable about the fact that we will be able to sustain working capital.

Can I just ask a quick follow-up question, Vittorio or Cosimo? If I were to place an order for not an unusual product, for a fairly standard sofa at the moment, say, in Macy's or here in the UK, what kind of delivery time would I expect now and what would I expect in maybe a year's time?

Okay, as far as is concerned the North American market we are back to the lead time we announced the market, means it depends of the area where we ship the goods, but we think that, let's say, 10 or 12 weeks that is the standard furniture trade.

Of course we have been facing, as you heard already a difficult moment with the shift of the production and that -- has been also count in some delays and some overstock. Some goods arrived just two weeks ago means that we need a little bit of time to reduce the inventory to come back to the standard order flow. In Europe it's mainly (inaudible) you mean not for China, correct? If it is for Europe, for instance, the UK will cost between seven, eight.

Okay, thank you.

(Operator Instructions). Our next question comes from Dimitri Duffeleer with QuaeroQ.

Hello, good morning. Can you just give me maybe two questions? The first one would be a flavor of the speed of the rollout of the Natuzzi and Italsofa retail points.

And the second one would -- to comment on the current situation in Brazil and what you're doing over there.

To answer --- (multiple speakers)

Dimitri, Simon here.

Hi, Simon.

Your question about Natuzzi and Italsofa; I'll start with Italsofa. We've (technical difficulty) direct links with (technical difficulty) and making it less religious about retail stores and moving it more to free market, [having] just a little bit more latitude on price [plans].

Regarding Natuzzi, there's been a singular focus on opening stores at the end of this year simply because it gives us momentum into next year. At the moment, we're looking at around about -- I say round about 23 galleries for the rest of the year with a primary bias towards North America and the stores are round about eight to 10 stores at the moment, probably more towards the Asian market. But there is nothing at the moment stopping us opening the Natuzzi stores. We've industrialized the new retail concept, which is proving very, very supported by our -- by customers.

So you're slowing down on the Italsofa part?

Dimitri, I missed the question.

Are you slowing down on the Italsofa part, or could you maybe just be a little more clear on the change of direction that you're taking over there?

I would suggest we've rebalanced in our priorities with the Americas as opposed to looking at Europe. We want Europe to be primarily focused on the Natuzzi brand. We have some strength in Canada, North America and Mexico on Italsofa so, in summary, it's a shift of emphasis.

Okay.

(Operator Instructions). We'll move next to a follow-up question from [Bart van den Wijngaard].

Yes, hi. I was wondering whether you could give an update on the cassa integrazione issue. Is there any news from that side?

Okay, this is Vittorio speaking. We have just renewed with the Italian government for additional two years the agreement for cassa integrazione. So it's -- it runs more or less in the same way compared with previous years, but we will have to invest some more money, for example, to train the people that we will put into cassa integrazione. But, again, the news is that we got two additional years of cassa integrazione --- ours to go.

Okay, very good to hear. And the obligation to invest is in Italy, I assume of course. Is that any -- how does that compare to your investments in the past in Italy? Is there additional investment then?

We have to invest on Natuzzi brand, since Natuzzi brand is the brand -- the only brand produced in Italy. So if we do advertising, if we do training on Natuzzi brand will be -- this will be accounted as an investment. But it is not for investment made in Italy. Everything that leads to more production in Italy will be fine for Italian authorities. We have to renew the chain. We have to invest more in advertising, in training of the sales force and so on.

Okay, okay. And the extension for two years now, I thought the last time it was an extension for one year. Is this now, say, the last final two years or is there also a chance that it can again be renewed after this two-year period?

Today, yes, this is the last -- very last steps they told us in terms of cassa integrazione. In the meantime there are some other discussions between parties, which we call accordo di programma, but we'll see. An accordo di programma should be an additional agreement within parties, the companies local and the Italian government, in order to build up, to revamp the production in the -- in this area. But as far as cassa integrazione is concerned this is the very last two years that we will get.

We have already made -- we were forced to make a prediction in our talks with Italian government and after our -- today's calculation by the end of those three years we will have more than 1,000 people to, let's say -- on which we have a problem to solve, but we have two years in order to face this problem.

Okay. And could you also give an update on the separate opportunity you talked about during the last conference call? Is that still something you are studying?

I'm sorry, Bart, can you read again the question? I'm sorry.

Simon here again. We have in Natuzzi a range of opportunities and as we look at the brands we're defining which ones give us the biggest option. Fabric was a priority a couple of months ago, for sure, but we think there are bigger opportunities going further. It's a nice position to be in, so it's a question of prioritization.

Okay. And the bigger opportunities elsewhere are just in opening new retail points in, say, certain areas for the Natuzzi brand, etc.?

Yes. With a brand which has got two markets, say, a challenging European market and a growing international business, we've got to readjust our priorities probably more towards the growing business at the moment. So we're not short of things to do. It's just a question of which one will give us the biggest return.

Okay.

I'm sorry. I know I'm being a little bit vague. It's just it's a bit of work of progress at the moment.

Okay, I understand that. Okay. A question about the raw materials. Is there any change in costs, say, during the second half of the year? You expect additional pressure or similar pressure?

No. Today -- in recent months we experienced an increasing costs in labor, for example, but also other raw materials. Today the situation is stable, even if at higher levels. And the same for the freight cost. We experienced a strong pressure from shipping costs from China to USA and, again, the situation today is much more stable. We don't see any particular reduction, but at least prices are not going up.

Okay, good to hear. A final question from my side about any thoughts from your side about potential dividend payments now you've got the cash payment from the Chinese. Is there anything you could say about that?

So far we are concentrating into the Company and that's the shareholders, the main shareholders did in the recent years we continue to invest in ourselves. Today we have some very interesting opportunities both from brands and for geographic points of view which we are evaluating for our future. So we don't foresee in the foreseeable future any particular change in our dividend policy.

Let's say something about cost. You're asking me about cost. The only cost that continues to go up is the labor cost; Chinese labor cost first of all and Romanian labor cost.

That's very difficult for us to do something about as you currently have there our production facilities. Isn't that the same for all players in this industry, as most players are producing in China, so everybody is facing the same cost pressure?

Yes, of course labor cost is a national cost. It is the wages cost experiencing in China and Romania. So the growing market, the growing economies are increasing their labor cost. So it's the same for any competitor producing in China and Romania. You're right.

Okay. I don't have any additional questions.

Thank you.

(Operator Instructions). You have a follow up from Dimitri Duffeleer.

Yes, just coming back on my question on the situation in Brazil. Could you comment a little on what you're seeing in the market there?

Okay. In Brazil we are improving the organization. Last February -- let's say March/April this year we hire Pablo Pla. Is a manager that comes from international US company, General Mills. He's a very good manager. We are appointing him as CEO and he will control sales and production, obviously. We got Magazine Luiza. Magazine Luiza is the biggest distributor -- retail distributor in Brazil, with 650 stores, and they do, I believe, $6b business.

So we are experimenting now in 11 stores the concept and so -- the business is growing in Brazil. And we organized a congress in our factory in Salvador de Bahia that will start next Friday. We invited and we will have some 200 Brazilian customer with all the agent and we will introduce all the 2012 collection. And then the potential is there. We are getting organized. We are getting organized, but Brazil offers certainly a huge potential opportunity for our Group. I believe that within 30 or 60 days we will have a very clear idea about the plan -- the growing plan for Brazil.

Could you maybe also comment on the competition and the general market today? What are competitors doing? We saw two years ago that De Coro, the -- your Chinese competitor, went in liquidation. Are we still in the same kind of environment?

Dimitri, this is Cosimo Cavallo speaking. Overall the competition -- as we already probably announced in the past, we have still a solid position from some Chinese manufacturer, like [Manwa], [HDL], or [Shears] or other players in the market, even if, of course, today we think that they face the same issues we are facing in terms of labor cost, for instance, or currency issue that we can have in Europe or in the States.

I would say that's no great novelty, so clearly there's -- need to be seen also double [feats]. One is an opportunity because we know the strengths and weaknesses here. And on the other hand it's extremely, I would say, challenging in order to be always more competitive and to defend the market share. We have tried to gain new market share through a program, for instance, that is (technical difficulty) for the key account.

In Europe, for instance, Sofa Italy is doing better than Chinese competitors because we make -- the main lever of this program is the service, along with the strong ratio that is, I would say, good quality for money. So that's mainly what's happening in the world.

Okay. Maybe just one follow-up question that would be more for Giuseppe, just to understand how are you evolving in the general productivity improvements and the new production methods in the different -- on the different production sites.

This is Vittorio. As far as productivity is concerned, we continue to improve in Romania where the business model is well defined. And we have still the problems in productivity that we mentioned before due to the relocation, the new hirings, the new people and so on. But Giuseppe is recovering month by month.

I remember that in March we were close to 15 weeks in terms of shipping times and then we reached 18. Today we are again in the area of 12, 13, so everything is going better in China, which was the main concern, also productivity.

In terms of the moving line, the moving line you know that is a very new logic that we are applying to a very handmade process. We are continuing to analyze this process. We are not ready to understand fully capacity of this new logic, but we continue to analyze that and will be ready as soon as possible in displaying results.

Okay. And then maybe just one last one that would be the rationalization of the number of models and more efficiency in the design of the different products.

It will take six months' time. First was we should start from somewhere. We should start from somewhere. Today Sofa Italy is our priority. Sofa Italy, why? Because we can get -- use the volume and fill -- fulfill the production in our Romania factory where we are manufacturing at 70% of the production capacity. So our priority today is to fulfill the production capacity in Romania and Sofa Italy is the answer.

Obviously, with Sofa Italy we need to meet the bigger retailer needs, in other words, to do business with a customer like IKEA, or Begros, or BUT in France, Conforama, or DFS, the big, big guys. There are seven, eight big distributors in Europe, but they are very demanding in terms of price point and in terms of service level. And we realize that we have a huge opportunity to do product innovation and production process innovation. So we are starting giving to us priority where we should start. And this is something that, to be honest, we should do.

At the end of this week we have a workshop with the top management and with the regional managers where we, all together -- we should be agreed where we should start, which brand and which market. Because it should be a Company priority, not just the brand management priority, but the entire Company will be involved in order to achieve the goal that the Company should establish.

So it's not something that could happen overnight, but we are going to define priority by brand and by market, where to grow and how to grow and what we need to accomplish in order to get the opportunity. The opportunity are there. We are very much confident, but we need to well define brand, market, distribution channel, how to organize the entire supply chain. We became a global Company; that's the reality.

We are a global Company. We have been working just to update all you guys. We have been working all 2010 and 2011 to give clear identity to the brand portfolio. Leather Edition today very clear; the customer understand the value of leather Edition brand, which is based on the leather and craftsmanship. Customer love it. We have done a wonderful job in giving very clear identity. The same with Italsofa. And we well define the Sofa Italy brand. So it's a brand that targets individual customer, target individual distribution channel and we are linking brand, market, distribution channel and factory and entire supply chain that will supply the customer and keep our promises.

We became global. Now we are reorganizing the entire Company by brand, by market, by distribution channel, by linking factory to the brand and the distribution channel at the markets and then defining even all the new process and organization. We are at this stage now and I believe we need to organize as soon as possible a road show where we need to explain all the work we have done and all the priorities that the Company should have.

Okay, thank you very much. Grazie mille.

There are no further questions at this time.

So if there are no other further questions we thank everybody. And of course we remain available at your disposal. For any further questions you can call me or send an email at my email. Thank you very much to everyone.

Thank you. Ladies and gentlemen, that will conclude today's presentation. Thank you for your attendance.