Natuzzi S.p.A [NTZ] A Good Trade as COVID-19 Restrictions Ease Up

Natuzzi S.p.A [NYSE:NTZ] is gaining quite strongly today and is up by over 10%. The stock has no major news and is riding the upside momentum in the market today.  A few weeks ago, the company’s board approved consolidated financial results for half the year and the second quarter of 2020.

 The company noted that COVID-19 had significantly affected the consolidated financial results for the second quarter of 2020. The pandemic effects led to the closure of both the factories and the stores.

Apart from China, that had its stores close as from mid-January up until almost the end of February 2020, the other stores were closed for most of this quarter as from mid-March. The store began coming back to life from mid-may. The situation was almost similar in Mexico, where the stores began operating again in July after being closed mid-April.

The company’s factories were also significantly affected by different countries. Most of them remained closed for the large part of the second quarter. Factories in Italy, Romania, Brazil, and China were all closed at some point between mid-February and mid-July. The earliest factory closed was the one in China that was closed in February while the last one was in Brazil that was closed and reopened twice between April and July. 

The company has been working hard, starting progressive initiatives to check the negative effects brought about by the pandemic. The group’s main aim is to sustain the company’s liquidity that will see it maintain its business operations.

Among the initiatives taken for this purpose include temporary lay-offs in various countries including Spain, Italy, the United Kingdom, Romania, Brazil, China, and the USA. In Italy, temporary lay-off related to COVID-19 is expected to extend until the end of 2020. Another measure has been to defer and/or suspend social and fiscal payments in various countries.

The group has also deferred rent payments in some countries, and suspended the payments altogether in others based on the severity of the situation. They have also cut down advertising and marketing expenses, as well as other operating costs, since most of the plants have been closed, and ceased making investments as they went to see how the COVID-19 pandemic will; pan out.

Following the lifting of COVID-19 restriction in most countries, the company’s business has since recorded significant improvement recovering from the effects of the pandemic. There has been increased demand leading to a product backlog. The company is working hard to revamp its production capacity to meet the increased demands but remain cautious with 2020 prospects. The hopes of an end to COVID could be a trigger to the company’s improved stock performance. 

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