Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Natuzzi First Quarter 2016 Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for your questions. Joining us on today's call from Italy are Natuzzi's Chairman and Chief Executive Officer, Mr. Pasquale Natuzzi; the Chief Financial Officer, Mr. Vittorio Notarpietro; the Chief Brand and Sales Officer, Mr. John Luca Parelgi and Francesca Cocco, Investor Relations, Manager. As a reminder today's call is being recorded. I would now like to turn the conference over to Francesca. Please go ahead.

Good morning to our listeners in U.S. and good afternoon to those of you connected from Europe. Welcome to the Natuzzi first quarter 2016 conference call. After a brief introduction, we'll give room for a Q&A session. Mr. Pasquale Natuzzi together with the Management Team will be glad to answer to your questions. By now you should have received an email copy of the Natuzzi earnings results. If not, you can find this information within our Web site at www.natuzzi.com under the Investor Section or please call our Investor Relations Department at +39 080 882011 to receive the results by email. You can also email information requests or questions to our email address investor_relations@natuzzi.com. We'll respond to you as soon as possible. Before proceeding, we'd like to advise our listeners that our discussion today could contain certain statements that constitute forward-looking statements under the United States Security Law. Obviously, actual 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 discussed such risks and uncertainties, which have in the past affected and may continue to affect our results of operation and financial condition in our Annual Report on Form 20-F for the fiscal year ended December 31, 2015. These reports are available within our website www.natuzzi.com or from us upon request. You may also obtain a copy of our Form 20-F filing from the United States Securities and Exchange Commission. And now I'd like to turn the call over to Mr. Pasquale Natuzzi, Chairman and CEO of the company.

Good morning and good afternoon to the listeners [indiscernible] Natuzzi and I would like to comment the result of the first quarter in a little bit different way from the past. Just to remember everyone that for seven consecutive quarters there has been -- let's say a good improvement quarter-by-quarter in the main division of the company like the operation, like the sales while not in many, many cases like the reduction of SG&A and many other indicators that I would like just to remind everyone and primarily to remind the management because we look [indiscernible] number and strategy and everything almost every week that you have management meeting. Revenue for the first quarter of this year has been €120.7 million compared with €122.6 million which means minus -- we had total revenue of minus 1.5% but the gross margin which has been 34.3% that compare with the 29.4% of last year an improvement of 4.9%. EBITDA which we achieved 4.3 million equal to 0.35% of sales has improved 4.7% compared to the previous year of sales through a positive impact of exchange rate, raw material cost reduction, efficiency and improvement in the production process and reduction of SG&A costs. Let's go to a more detailed analysis of what we should consider business-to-business and business-to-consumer. Business-to-consumer is whatever we sell under Natuzzi and so the deletion of business-to-consumer achieved 71% of the Group sales. The revenue recorded a slight drop of 2.1% because we had two days strike in our Italian factories, while the order flow for Natuzzi brand has been up by 9.7%. Gross margin that has been 4.3% compared to the one of last year, so has registered let's say a good improvement thanks to the increase in price, because we increased the price list [ph] and we…

[Operator Instructions]. We’ll take your first question from Filippo Rima from Credit Suisse.

Good afternoon Mr. Natuzzi and congratulations for the impressive turnaround that you are delivery quarter-after-quarter knowing it’s not always a straight line. Can you elaborate a little bit on the China investment? China is the big part of the new openings and of the investments that you have been doing now for several quarters. Can you give us a feeling, what is the business in China in terms of positioning? Is there on, let’s say on PPP Parity. So it would be the same level and let’s say the Natuzzi business that we know outside of China. So can you give us a little bit of color on the situation, on the strategy and where we’re on the ground in China?

So first was, in China, we have 85 stores Natuzzi tradition [ph] and we have 44 Natuzzi Italia stores. The distribution, the furniture distribution without the real estate in China is organized by furniture malls. Now in almost in all the malls, where we have a Natuzzi Italia stores, we have also Natuzzi Editions stores in the same building, probably different floors but in the same building we have stalls of Natuzzi Edition and stalls of Natuzzi Italia. We did already marketing research because we were little bit concerned for potential or you know cannibalization and the result of the research which was done by Bayne & Company was very positive. There was no overlap. So that is something that we would like to emphasize. Now, so we have again 85 stores in Q3, Edition, but we have 14 stores owned by the company that for now are 10 because we shutdown 4 stores that were not profitable. The order flow in China that is in the margin is very positive, very positive and in North China, also Asia Pacific in general, but certainly we are focusing that primarily in China, in Korea and in Australia. Those are the three markets that where we have a very good presence, very high brand awareness, very good positioning and very good margins. So certainly Asia is again, China, Korea and Australia are the countries in Asia Pacific where we are focusing in order to grow our business. Did I answer your questions?

Yeah, thank you. And maybe a follow-up can you give us maybe a presume, rough number, that does not have to be precise and what do we expect in terms of new opening for the rest of the year? So is this 10 per quarter, is this a good average, you expect to accelerate or to decelerate the opening?

Yeah, okay. Diego Babbo. which is our retail manager will answer to you, okay?

For the rest of the year, first of all let me mention that you are a little tied into the openings of this year. For the time being we have already opened 10 stores as Mr. Natuzzi said up till now, but there are in pipeline already in the following months already another 5 stores already fully projected and ready to be opened accomplishing a married retail format that we have launched end of last year in London, the brand new retail form that is already proving to be -- allowing us to create a successful business case. That store has been strongly appreciated by most of our dealers existing or prospects and we have already ready to open other 5 stores specifically. Last Friday, the same dealer that opened the fifth store has opened another store in London in another retail park. On top of that, during this Congress we had as Mr. Natuzzi was saying great feedbacks from our Australian dealers that starting well with the performance and they are committed to 3 stores that are going to be opened within Sydney and Queensland to be opened in quarter 3 of this year. On top of that, French partners are coming into Congress to confirm their already commitment over the 3 opening, possibly 4 within this year in all French region. Again reiterating the kind of retail format that we have already launched. On the other side when you see the already have lease agreements on the negotiations for a directory of register [ph] in the Tri-State area, close to New York where another great retail park will be hosting and another Natuzzi Italia store and we are negotiating many other deals in this state. On top of that, China is the main progress where for retail distribution for the rest of the year. We had very good feedback from many and some of the recent fairs we attended mostly the Guangzhou fair in March, we have already achieved a total of 12 interested parties to open stores again this year and we are now following up on with all this partners and in our congress and on one-to-one business meeting. So basically, we are trying to see, we seem to target 35 openings in the end of the year divided by Editions and Italia in terms of stores. On top of the shop format, just let you know up till now just to let you know up till now we have already opened 30 galleries, up till now and we're growing realistically to pen another 45 till the end of the end of the year. These are mostly related to the lead time and the confirmation from our dealer, but that's the main goal we're going to achieve.

[Operator Instructions] We will hear next from [indiscernible]

I like to have some more information about the differences between Natuzzi Italia, Natuzzi Edition and the point of sales measured from past in time of sales and profitability? This is the first question. The second question is if you can give us some idea of when we will begin to see some affect from the reduction of processing cost of data [ph] and facilities.

Okay. Without being, -- okay. John Luca Parelgi, who is our commercial manager, worldwide manager will answer to your question, okay.

Good afternoon, John Luca,

John Luca Parelgi is our worldwide manager, commercial manager.

Regarding the first question, the positioning of our two product lines is the following Natuzzi Italia is our premium line and the kind of product offer we're now offering to our final consumers with right is about living, dinning, [indiscernible] and relaxing. Our main distribution channel is [indiscernible] and we do in Sub-Continent, I mean the three main regions that we are now working. The business is growing very well and we're now developing nearly 10 concepts to develop in the major markets which are going to be the basis of our development in the next year. Natuzzi Editions is the product line which is based on the [indiscernible] segment of the market and our main distribution channel is in shop concept through multi-brand stores worldwide. Apart from that we distribute Natuzzi Editions in China through mono-brand stores in the furniture malls and in interior mono-brand stores as well. This business is continuously and very solidly and the kind of developments that we list above about premium figure, is also related to that. So we think both of our product lines are going to be the bulk of our growth this year and for the following year and for the following year.

This is Pasquale Natuzzi, regarding the result of the production efficiency, we have -- I mentioned in some previous call that we have experimental laboratory, where we've been experimenting all the new production system and we had also experimental factory where we had 250 people working in that factory, where we’re experimenting in production, the new production line and to understand which kind of improvement can we execute. Now, probably I can now -- 2014 the industrial cost, the average industrial cost for the Italian factories was near €1.07 [ph] something like that. Last year the average of the four factories that we have in [indiscernible], in our region was $0.87 or $0.88 which means we’ve already made improvement, 2015 compared with 2014. But we are watching the experimental factory on weekly basis where we implement all the improvement and the result of the first four months of the first quarter of this year in the experimental factory we achieve $0.53, $0.54 which means cost efficiency as reduction cost of the product is almost under the possibilities to reduce the cost by 50% compared with 2014. Obviously, this huge improvement in terms of cost efficiency will give us opportunity to improve our margin, but go ahead to becomes a more competitive and improve the top line of the sales. So that's the, regarding the efficiency, in our lean production, we are very much and in covers, the result that we so far achieved.

Thank you very much Mr. Natuzzi. So we can get that 60% of increasing efficiency, will you put that in the reduction of the prices and the 40% in seasonal margins, it’s acceptable guess or is [Multiple Speakers]?

Yes, okay, okay. Let’s say it’s reasonable achievable. Certainly for us to increasing the top-line, it’s one of our priority now. Because the sales, our price list and then on our sales, our revenue are not just the industrial costs, there are remain other recovery that we do in terms of overhead costs, the commercial costs, marketing things like that. Anyway the question you asked, when we will see the result of production efficiency, we had 2015 new improvements, 2016 we are gaining efficiency quarter-by-quarter and month-by-month. Because we monitor on weekly basis to be honest, but month-by-month, so we have a Management VP and we are again the very much in coverage.

We’ll take our next question from [indiscernible].

This is [indiscernible]. First of all, congratulation on the significant improvement of the gross margin. Regarding this gross margin referring to what you’re just said Mr. Natuzzi, its 30% to 35% is that sustainable. And I also have couple of more questions maybe I can just put them all in a row. Concerning the SG&A or the other SG&A, which amounts to €20.7 million during the first quarter of 2016. What does that include and do you also see improvement potential to reduce those indirect costs of the company? And maybe if I may a final question. In the past Natuzzi has opened multiple stores, but also has closed several underperforming stores. So my question regarding that is, how do you attract the performance of new stores? And how do you decide to keep a store open or to see if it’s viable or not for the longer term? Those were my three questions. Thank you very much.

Okay. I will answer starting from your last question. So as I said before, we improving the organization with the three new managers in America with a retailer experience. They are pure retailer experience, very good, okay, because we have a plan to grow in America. But we’ve been also dividing the organization at an adequate level. Where we are two different organizations today with the different people, with the different responsibility. Business through consumer is general capacity our worldwide commercial director and [indiscernible] is responsible for business-to-business. So having two separate organization makes, I mean the organization much leaner and responsible for the business. Then we’ve been at the business-to-consumer, we are reinforcing improving the management also on retailer at the corporate level. So management at corporate level with the retailer experience, retailer management in America with the retailer experience, we are very much focusing on the retailer, because the future of the company, in order to support the grow at the brand positioning. We need the people, managers with the retailer experience and again we are very much aware of that. So that’s, I hope that’s the [indiscernible].

And at this time, there are no further next questions in the queue.

Good afternoon again [indiscernible]. Just to answer to your question about, if we already got it in terms of what key ratio on clothing sores and how can we measure the results in the meantime. So once we’ve would be in the last three years starting from 2015 until now is to close 23 [indiscernible] stores and the division process was as simple as that. We looked at the figures, which is fully trackable but though our panel of KPIs and we also checked the market share we are reaching in that market. If the performance of that store was that poor and was realistically not achievable and the turnaround that we’re expect in order to get back to a positive EBIT, so what we call O+ store then we decided to close those stores and at the same time we planned and created the development plan based on an evaluation of the market divided by price and by style that provided us the amount of stores that that market could be eligible for new openings denoted to the offset closures. That said, we are now as Mr. [indiscernible] said, we are switching from more and more ancillary same mindset across which is leading us to create more and more efficient comfort panel although it will be KPI of stores talking about the - others stores mostly, where we are now able to measure traffic into the store, conversion rate and all the typical KPI of our stores and this allow us to come to an evaluation on a quarterly basis and which are the stores that can be eventually closed. Up to now, we think we have reached the stable network, so all the closure of that has been realistically achievable and what we are now looking for is to measure the performances of the store already opened and we do it through the panel that I mentioned. I hope I answered your questions?

Okay. I told you I have two questions comes from shareholders, the sustainability of the 34, 35 indicate that it has been 34.3% of gross margin in the first quarter of 2016. We are not satisfied at all with that number because we have in mind a better number for the future but this where we start from the higher production efficiency, higher productivity of the VOS chain and as a consequence as a result of a different mix between the Natuzzi branded business and the private label. That for sure we had it in the past, in 2010 we had 40% of gross margin and under constant exchange rate and raw material prices we had to increase that. Mr. Natuzzi before said very clearly, that we are not yet satisfied and this is just another step for the efficiency and we have to achieve that. As mentioned before by Mr. Natuzzi, it will both come to balance between the amount of cross savings and the amount of the invested on the sales marketing order to increase the level of sales. But the higher would be the sales, the lower -- the higher would be the profitability of the company due to the fixed cost structure of this company. So sustainable under constant exchange rate and raw material prices but we are not yet satisfied and we are working for example in the experimental laboratory to do that. This is for you know gross margin. Okay?:

And at this time, there are no further questions in the queue. Mr. Natuzzi do you have any concluding remarks today.

This is Francesca Cocco. Any other question you would like to maybe ask we are open in the next stage and oyu can call and you can write to the investor relations email and we will answer to you as soon as possible. So thank you for everything and we’ll speak to you next time. Bye.

And that does conclude today’s teleconference. We thank you all for your participation.