Natuzzi's Board of Directors Announces Consolidated Fourth Quarter and Full Year...

Natuzzi's Board of Directors Announces Consolidated Fourth Quarter and Full Year 2007 Financial Results

SANTERAMO IN COLLE, Bari, Italy--(Business Wire)--
Natuzzi:

FULL YEAR 2007 FINANCIAL HIGHLIGHTS

-- TOTAL NET SALES DOWN BY 13.7% AT EUR 634.4 MILLION AND SEATS
SOLD DOWN BY 14.1% OVER 2006

-- OPERATING LOSS OF EUR 49.1 MILLION, VERSUS OPERATING INCOME OF
EUR 16.5 MILLION IN 2006

-- NET LOSSES AT EUR 62.6 MILLION VERSUS NET EARNINGS OF EUR 12.3
MILLION IN 2006

The Board of Directors of Natuzzi S.p.A. (NYSE: NTZ) ('Natuzzi' or
'the Group'), the world's leading manufacturer of leather-upholstered
furniture, today presented the fourth quarter 2007 financial results
and the project of the consolidated financial statements for the full
year 2007.

NET SALES

Natuzzi total net sales during the fourth quarter of 2007
decreased by 8.4 percent at EUR 176.9 million from EUR 193.1 million
reported in the same quarter of 2006. Units sold in the last three
months of 2007 decreased by 5.1 percent. Considering the whole 2007,
total net sales were at EUR 634.4 million, down 13.7 percent as
compared to EUR 735.5 million reported for the year ended on December
31, 2006.

In the fourth quarter of 2007 upholstery net sales were at EUR
157.2 million, down 9.8 percent with respect to the previous year same
quarter. Other sales (principally living-room accessories and raw
material produced by the Group and sold to third parties) increased by
4.2 percent at EUR 19.7 million over fourth quarter 2006.

During the last three months of 2007, net sales in the Americas
decreased by 6.8 percent at EUR 54.5 million with respect to 2006
fourth quarter and by 12.7 percent at EUR 89.2 million in Europe. Net
sales in the rest of the world were flat at EUR 13.5 million.

Twelve new stores were opened in 2007 fourth quarter (4 in UK, 2
in France and 1 each in Italy, Latvia, Netherlands, Australia, Taiwan,
Mexico), thus bringing the total number of stores (Natuzzi Stores and
Divani & Divani by Natuzzi) to 302 as of December 31, 2007. As of the
same date, there were 483 Natuzzi Galleries worldwide.

Leather upholstered furniture net sales during 2007 fourth quarter
decreased by 6.3 percent at EUR 142.9 million and fabric upholstered
net sales by 34.1 percent at EUR 14.3 million.

During the last quarter of 2007, net sales for the Natuzzi branded
products were at EUR 91.4 million, down 16.1 percent from EUR 108.9
million reported in 2006 same quarter, whereas Italsofa products
increased by 0.8 percent at EUR 65.8 million.

GROSS & OPERATING RESULTS

For the fourth quarter of 2007 the Group reported a gross profit
of EUR 43.2 million, down from EUR 58.5 million in 2006 fourth
quarter. In the same period, gross margin decreased at 24.4 percent
from 30.3 percent in 2006 comparable quarter.

Considering the whole 2007 the Group had a gross profit of EUR
173.8 million as compared to a gross profit of EUR 244.9 million in
2006. For the twelve month period, gross margin decreased from 33.3
percent in 2006 to 27.4 percent in 2007.

During the last three months of 2007 the Group reported a net
operating loss of EUR 20.9 million as compared to a net operating loss
of EUR 3.4 million in the previous year comparable quarter. For the
twelve month period ended on December 31, 2007, the Group reported a
net operating loss of EUR 49.1 million, versus a net operating income
of EUR 16.5 million in 2006.

FOREX AND TAXES

In the fourth quarter of 2007 the Group had a net foreign exchange
loss of EUR 2.3 million as compared to a net foreign exchange gain of
EUR 2.8 million in 2006 same quarter.

Group's income taxes in the last quarter of 2007 were at EUR 16.6
million, as compared to income taxes of EUR 1.0 million in 2006 last
quarter.

NET RESULT AND GROUP EARNINGS PER COMPANY'S SHARE

For the quarter ended on December 31, 2007, the Group reported net
losses of EUR 39.6 million (or EUR 0.72 losses per share), versus
Group's net losses of EUR 5.1 million (or EUR 0.09 losses per share)
in the fourth quarter of 2006.

Considering the whole 2007, the Group had net losses of EUR 62.6
million (or EUR 1.14 losses per share), versus net earnings of EUR
12.3 million (or EUR 0.22 earnings per share) reported for the year
2006.

Pasquale Natuzzi, Chairman and CEO, commented: "In 2007 the Group
went through an increasingly difficult macroeconomic environment,
still affecting the furniture industry today, coupled with the steady
strengthening of the Euro against the US dollar. Besides, in last
December our Natuzzi-branded production and deliveries were negatively
impacted by exceptional bad weather conditions at the Italian
manufacturing sites as well as by a nation-wide strike of the
transportation workers. As a result of the above, the Group reported a
double-digit net sales decrease year over year, in particular in the
medium-high segment manufactured in Italy".

"Due to lower volume sales, unfavourable currency conversion of US
revenues, higher raw material prices and the poor performance of our
retail network and South-American manufacturing plants, the Group
reported disappointing operating losses in the fourth quarter and full
year 2007, but still maintains a sound net financial position".

Mr. Natuzzi concluded: "Top management is working on the
operational details of a three years business plan covering the period
2008-2010 which will be ready in the next few weeks. As far as 2008 is
concerned, year-to-date seats sold have increased at low double-digit
rate compared to the same period of 2007 also because of accumulated
back-log at the end of last year. In addition to that, we expect a
good market response for our new collections at the forthcoming High
Point and Milan International fairs. In light of the aforesaid, we
should increase unit sales in the region of 10 percent on a yearly
basis and, through a more efficient cost structure, also break even at
the operating level."

FOURTH QUARTER 2007 TELECONFERENCE

Pasquale Natuzzi, Chief Executive Officer and Chairman, Salvatore
Gaipa, Chief Financial Officer and Nicola Dell'Edera, Finance
Director, will discuss financial results, followed by a question and
answer session, in a teleconference at 10:00 a.m. New York time (3:00
p.m. London time - 4:00 p.m. Italian time) on Tuesday April 1, 2008.

ABOUT NATUZZI S.P.A.

Founded in 1959 by Pasquale Natuzzi, Natuzzi S.p.A. designs and
manufactures a broad collection of leather-upholstered residential
furniture.

Italy's largest furniture manufacturer, Natuzzi is the global
leader in the leather segment, exporting its innovative, high-quality
sofas and armchairs to 123 markets on 5 continents.

Since 1990, Natuzzi has sold its furnishings in Italy through the
popular Divani & Divani by Natuzzi chain of 125 stores, and 1 Natuzzi
Store. Outside Italy, the Company sells to various furniture
retailers, as well as through 173 licensed Divani & Divani by Natuzzi
and Natuzzi Stores.

Natuzzi S.p.A. was listed on the New York Stock Exchange on May
13, 1993. The Company is ISO 9001 and 14001 certified.

FORWARD-LOOKING STATEMENTS

Statements in this press release other than statements of
historical fact are "forward-looking statements". Forward-looking
statements are based on management's current expectations and beliefs
and therefore you should not place undue reliance on them. These
statements are subject to a number of risks and uncertainties,
including risks that may not be subject to the Group's control, that
could cause actual results to differ materially from those contained
in any forward-looking statement. These risks include, but are not
limited to, fluctuations in exchange rates, economic and weather
factors affecting consumer spending, competitive and regulatory
environment, as well as other political, economical and technological
factors, and other risks identified from time to time in the Group's
filings with the Securities and Exchange Commission, particularly in
the Group's annual report on Form 20-F. Forward looking statements
speak as of the date they were made, and the Group undertakes no
obligation to update publicly any of them in light of new information
or future events.

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NATUZZI S.P.A. AND SUBSIDIARIES
Unaudited Consolidated Statement of Earnings for the quarters ended on
December 31, 2007 and 2006 on the basis of Italian GAAP
(Expressed in millions of EUR except per share data)

Three months ended on Abs. % Over Percent of
Diff. Sales
31-Dec-07 31-Dec-06 (Under) 31-Dec- 31-Dec-
07 06
--------------- ---------- ---------- ------ -------- ------- -------
Upholstery net
sales 157.2 174.2 (17.0) (9.8)% 88.9% 90.2%
Other sales 19.7 18.9 0.8 4.2% 11.1% 9.8%
Total Net Sales 176.9 193.1 (16.2) (8.4)% 100.0% 100.0%
--------------- ---------- ---------- ------ -------- ------- -------
Purchases (84.5) (80.5) (4.0) (5.0)% (47.8)% (41.7)%
Labor (28.4) (29.2) 0.8 2.7% (16.1)% (15.1)%
Third-party
Manufacturers (5.4) (4.3) (1.1) (25.6)% (3.1)% (2.2)%
Manufacturing
Costs (12.1) (8.6) (3.5) (40.7)% (6.8)% (4.5)%
Inventories,
net (3.3) (12.0) 8.7 72.5% (1.9)% (6.2)%
Cost of Sales (133.7) (134.6) 0.9 0.7% (75.6)% (69.7)%
--------------- ---------- ---------- ------ -------- ------- -------
Gross Profit 43.2 58.5 (15.3) (26.2)% 24.4% 30.3%
--------------- ---------- ---------- ------ -------- ------- -------
Selling
Expenses (49.9) (49.0) (0.9) (1.8)% (28.2)% (25.4)%
General and
Administrative
Expenses (14.2) (12.9) (1.3) (10.1)% (8.0)% (6.7)%
Operating
Income (Loss) (20.9) (3.4) (17.5) (514.7)% (11.8)% (1.8)%
--------------- ---------- ---------- ------ -------- ------- -------
Interest
Income, net 0.4 0.7 (0.3) 0.2% 0.4%
Foreign
Exchange, net (2.3) 2.8 (5.1) (1.3)% 1.5%
Other Income,
net (0.5) (4.3) 3.8 (0.3)% (2.2)%
Earnings
(Losses) before
taxes and
minority
interest (23.3) (4.2) (19.1) (454.8)% (13.2)% (2.2)%
---------------- ---------- ---------- ------ -------- ------- -------
Income taxes (16.6) (1.0) (15.6) (9.4)% (0.5)%
Earnings
(Losses) before
minority
interest (39.9) (5.2) (34.7) (667.3)% (22.6)% (2.7)%
---------------- ---------- ---------- ------ -------- ------- -------
Minority
Interest (0.3) (0.1) (0.2) (0.2)% (0.1)%
Net Earnings
(Losses) (39.6) (5.1) (34.5) (676.5)% (22.4)% (2.6)%
--------------- ---------- ---------- ------ -------- ------- -------
Earnings
(Losses) Per
Share (0.72) (0.09) (0.63)
--------------- ---------- ---------- ------ -------- ------- -------
Average Number
of Shares
Outstanding* 54,824,227 54,738,538
---------------- ---------- ---------- ------ -------- ------- -------
(*) Net of
shares
repurchased

---------------- ---------------------------- -------- ---------------
Key Figures in Three months ended on Abs. % Over Percent of
U.S. dollars Diff. Sales
(millions)
31-Dec-07 31-Dec-06 (Under) 31-Dec- 31-Dec-
07 06
---------------- ---------- ----------------- -------- ------- -------
Total Net Sales 256.2 249.0 7.2 2.9% 100.0% 100.0%
Gross Profit 62.6 75.4 (12.8) (17.0)% 24.4% 30.3%
Operating
Income (Loss) (30.3) (4.4) (25.9) (588.6)% (11.8)% (1.8)%
Net Earnings
(Losses) (57.3) (6.6) (50.7) (768.2)% (22.4)% (2.7)%
Earnings
(Losses) per
Share (1.04) (0.12) (0.94)
Average exchange
rate (U.S.
dollar per
Euro) 1.4480 1.2894
---------------- ---------------------------- -------- ------- -------
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NATUZZI S.P.A. AND SUBSIDIARIES
Unaudited Consolidated Statement of Earnings
for the years ended on December 31, 2007 and 2006 on the basis of
Italian GAAP
(Expressed in millions of EUR except per share data)

Twelve months ended on Abs. % Over Percent of
Diff. Sales
31-Dec-07 31-Dec-06 (Under) 31-Dec- 31-Dec-
07 06
--------------- ---------- ---------- ------- ---------------- -------
Upholstery
net sales 563.5 660.3 (96.8) (14.7)% 88.8% 89.8%
Other sales 70.9 75.2 (4.3) (5.7)% 11.2% 10.2%
Total Net Sales 634.4 735.5 (101.1) (13.7)% 100.0% 100.0%
--------------- ---------- ---------- ------- -------- ------- -------
Purchases (308.2) (313.2) 5.0 1.6% (48.6)% (42.6)%
Labor (101.7) (109.4) 7.7 7.0% (16.0)% (14.9)%
Third-party
Manufacturers (16.5) (19.6) 3.1 15.8% (2.6)% (2.7)%
Manufacturing
Costs (41.1) (33.1) (8.0) (24.2)% (6.5)% (4.5)%
Inventories,
net 6.9 (15.3) 22.2 145.3% 1.1% (2.1)%
Cost of Sales (460.6) (490.6) 30.0 6.1% (72.6)% (66.7)%
--------------- ---------- ---------- ------- -------- ------- -------
Gross Profit 173.8 244.9 (71.1) (29.0)% 27.4% 33.3%
--------------- ---------- ---------- ------- -------- ------- -------
Selling
Expenses (173.9) (186.2) 12.3 6.6% (27.4)% (25.3)%
General and
Administrative
Expenses (49.0) (42.2) (6.8) (16.1)% (7.7)% (5.7)%
Operating
Income (Loss) (49.1) 16.5 (65.6) (397.4)% (7.7)% 2.2%
--------------- ---------- ---------- ------- -------- ------- -------
Interest
Income, net 1.7 1.5 0.2 0.3% 0.2%
Foreign
Exchange, net (7.1) 0.8 (7.9) (1.1)% 0.1%
Other Income,
net 2.8 0.5 2.3 0.4% 0.1%
Earnings
(Losses)
before taxes
and minority
interest (51.7) 19.3 (71.0) (367.7)% (8.1)% 2.6%
--------------- ---------- ---------- ------- -------- ------- -------
Income taxes (11.4) (7.1) (4.3) (1.8)% (1.0)%
Earnings
(Losses)
before
minority
interest (63.1) 12.2 (75.3) (617.0)% (9.9)% 1.7%
--------------- ---------- ---------- ------- -------- ------- -------
Minority
Interest (0.5) (0.1) (0.4) (0.1)% (0.0)%
Net Earnings
(Losses) (62.6) 12.3 (74.9) (608.7)% (9.9)% 1.7%
--------------- ---------- ---------- ------- -------- ------- -------
Earnings
(Losses) Per
Share (1.14) 0.22 (1.36)
--------------- ---------- ---------- ------- -------- ------- -------
Average Number
of Shares
Outstanding* 54,824,227 54,738,538
--------------- ---------- ---------- ------- -------- ------- -------
(*) Net of
shares
repurchased

--------------------------------------------- -------- ---------------
Key Figures in Twelve months ended on Abs. % Over Percent of
U.S. dollars Diff. Sales
(millions)
31-Dec-07 31-Dec-06 (Under) 31-Dec- 31-Dec-
07 06
-------------------------- ------------------ ---------------- -------
Total Net Sales 869.2 924.2 (55.0) (5.9)% 100.0% 100.0%
Gross Profit 238.2 307.7 (69.6) (22.6)% 27.4% 33.3%
Operating
Income (Loss) (67.2) 20.7 (88.0) (424.3)% (7.7)% 2.2%
Net Earnings
(Losses) (85.7) 15.5 (101.2) (654.7)% (9.9)% 1.7%
Earnings
(Losses) per
Share (1.56) 0.28 (1.84)
Average
exchange rate
(U.S. dollar
per Euro) 1.3701 1.2565
--------------------------------------------- -------- ------- -------
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GEOGRAPHIC BREAKDOWN

----------------------------------- -------- ------------------------
Sales* Seat Units
Three months Abs. % Over Three months Abs. % Over
ended on Diff. ended on Diff.
31- 31- (Under) 31-Dec- 31-Dec- (Under)
Dec- Dec- 07 06
07 06
===== ===== ====== ======= ======= ======= ======== =======
Americas 54.5 58.5 (4.0) (6.8%) 343,928 328,872 15,056 4.6%
% of
total34.7% 33.6% 46.4% 42.1%
Europe 89.2 102.2 (13.0) (12.7%) 337,053 394,338 (57,285) (14.5%)
% of
total56.7% 58.7% 45.5% 50.5%
Rest of
the
world 13.5 13.5 0.0 0.0% 60,024 57,372 2,652 4.6%
% of
total 8.6% 7.7% 8.1% 7.4%
-------------- ----- ------ ------- ------- ------- -------- -------
TOTAL 157.2 174.2 (17.0) (9.8%) 741,005 780,582 (39,577) (5.1%)
----------------------------------- -------- ------------------------
* Expressed in millions of EUR

------------------------------------ -------- ------------------------

BREAKDOWN BY COVERING

----------------------------------- -------- ------------------------
Sales* Seat Units
Three months Abs. % Over Three months Abs. % Over
ended on Diff. ended on Diff.
31- 31- (Under) 31-Dec- 31-Dec- (Under)
Dec- Dec- 07 06
07 06
=========== ====== ======= ======== ======= ======== =======
Leather 142.9 152.5 (9.6) (6.3%) 672,667 670,025 2,642 0.4%
% of
total90.9% 87.5% 90.8% 85.8%
Fabric 14.3 21.7 (7.4) (34.1%) 68,338 110,557 (42,219) (38.2%)
% of
total 9.1% 12.5% 9.2% 14.2%
Total 157.2 174.2 (17.0) (9.8%) 741,005 780,582 (39,577) (5.1%)
----------------------------------- -------- ------------------------
* Expressed in millions of EUR

------------------------------------ -------- ------------------------

BREAKDOWN BY BRAND

----------------------------------- -------- ------------------------
Sales* Seat Units
Three months Abs. % Over Three months Abs. % Over
ended on Diff. ended on Diff.
31- 31- (Under) 31-Dec- 31-Dec- (Under)
Dec- Dec- 07 06
07 06
=========== ====== ======= ======== ======= ======== =======
Natuzzi 91.4 108.9 (17.5) (16.1%) 318,382 399,207 (80,825) (20.2%)
% of
total58.1% 62.5% 43.0% 51.1%
Italsofa 65.8 65.3 0.5 0.8% 422,623 381,375 41,248 10.8%
% of
total41.9% 37.5% 57.0% 48.9%
TOTAL 157.2 174.2 (17.0) (9.8%) 741,005 780,582 (39,577) (5.1%)
----------------------------------- -------- ------------------------
* Expressed in millions of EUR
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GEOGRAPHIC BREAKDOWN

------------------------------------- ------ ---------------------
Sales*
Twelve Abs. % Over
months Diff.
ended on
31- 31- (Under)
Dec- Dec-
07 06
===================================== ===== ====== ====== =======
Americas 198.6 245.4 (46.8) (19.1%)
% of total 35.2% 37.2%
Europe 319.4 366.6 (47.2) (12.9%)
% of total 56.7% 55.5%
Rest of the world 45.5 48.3 (2.8) (5.8%)
% of total 8.1% 7.3%
------------------------------------- ----- ----- ------ -------
TOTAL 563.5 660.3 (96.8) (14.7%)
------------------------------------- ------ ------------- -------
* Expressed in millions of EUR

-------------------------------------- ------ ---------------------

BREAKDOWN BY COVERING

------------------------------------- ------ ---------------------
Sales*
Twelve Abs. % Over
months Diff.
ended on
31- 31- (Under)
Dec- Dec-
07 06
===================================== ===== ====== ====== =======
Leather 502.9 573.1 (70.2) (12.2%)
% of total 89.2% 86.8%
Fabric 60.6 87.2 (26.6) (30.5%)
% of total 10.8% 13.2%
Total 563.5 660.3 (96.8) (14.7%)
------------------------------------- ------ ------------- -------
* Expressed in millions of EUR

-------------------------------------- ------ ---------------------

BREAKDOWN BY BRAND

------------------------------------- ------ ---------------------
Sales*
Twelve Abs. % Over
months Diff.
ended on
31- 31- (Under)
Dec- Dec-
07 06
===================================== ===== ====== ====== =======
Natuzzi 336.1 416.2 (80.1) (19.2%)
% of total 59.6% 63.0%
Italsofa 227.4 244.1 (16.7) (6.8%)
% of total 40.4% 37.0%
TOTAL 563.5 660.3 (96.8) (14.7%)
------------------------------------- ------ ------------- -------
* Expressed in millions of EUR

GEOGRAPHIC BREAKDOWN

---------------------------- ----------- ---------------------------
Seat Units
Twelve months ended Abs. % Over
on Diff.
31-Dec-07 31-Dec-06 (Under)
============================ =========== ========= ========= =======
Americas 1,176,585 1,364,873 (188,288) (13.8%)
% of total 45.4% 45.2%
Europe 1,225,882 1,449,696 (223,814) (15.4%)
% of total 47.3% 48.1%
Rest of the world 189,926 202,133 (12,207) (6.0%)
% of total 7.3% 6.7%
---------------------------- ---------- --------- --------- -------
TOTAL 2,592,393 3,016,702 (424,309) (14.1%)
---------------------------- ----------- ------------------- -------

----------------------------- ----------- ---------------------------

BREAKDOWN BY COVERING

---------------------------- ----------- ---------------------------
Seat Units
Twelve months ended Abs. % Over
on Diff.
31-Dec-07 31-Dec-06 (Under)
============================ =========== ========= ========= =======
Leather 2,291,515 2,544,174 (252,659) (9.9%)
% of total 88.4% 84.3%
Fabric 300,878 472,528 (171,650) (36.3%)
% of total 11.6% 15.7%
Total 2,592,393 3,016,702 (424,309) (14.1%)
---------------------------- ----------- ------------------- -------

----------------------------- ----------- ---------------------------

BREAKDOWN BY BRAND

---------------------------- ----------- ---------------------------
Seat Units
Twelve months ended Abs. % Over
on Diff.
31-Dec-07 31-Dec-06 (Under)
============================ =========== ========= ========= =======
Natuzzi 1,171,651 1,506,981 (335,330) (22.3%)
% of total 45.2% 50.0%
Italsofa 1,420,742 1,509,721 (88,979) (5.9%)
% of total 54.8% 50.0%
TOTAL 2,592,393 3,016,702 (424,309) (14.1%)
---------------------------- ----------- ------------------- -------

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NATUZZI S.P.A. AND SUBSIDIARIES
Unaudited Consolidated Balance Sheet as of
December 31, 2007 and 2006 (Expressed in millions of EUR)

31-Dec-07 31-Dec-06
------------------------------------------- ----------- ----------
ASSETS
Current Assets:
Cash and cash equivalents 87.5 128.1
Marketable debt securities 0.0 0.0
Trade receivables, net 117.7 119.3
Other receivables 47.8 44.7
Inventories 107.3 100.3
Unrealized foreign exchange gains 0.9 5.5
Prepaid expenses and accrued income 1.8 2.0
Deferred income taxes 1.3 7.5
Total current assets 364.3 407.4
--------------------------------------------- ----------- ----------
Non-Current Assets:
Net property, plant and equipment 235.9 246.3
Treasury shares 0.0 0.0
Other assets 17.3 18.7
Deferred income taxes 0.0 2.3
------------------------------------------- ----------- ----------
TOTAL ASSETS 617.5 674.7
--------------------------------------------- ----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings 7.6 3.8
Current portion of long-term debt 0.3 0.3
Accounts payable-trade 89.3 79.5
Accounts payable-other 29.2 22.5
Accounts payable shareholders for dividends 0.6 0.6
Unrealized foreign exchange losses 0.0 0.0
Income taxes 1.6 4.6
Salaries, wages and related liabilities 17.5 21.7
Total current liabilities 146.1 133.0
--------------------------------------------- ----------- ----------
Long-Term Liabilities:
Employees' leaving entitlement 33.3 35.3
Long-term debt 2.1 2.4
Deferred income taxes 0.0 0.0
Deferred income for capital grants 13.3 14.1
Other liabilities 10.9 10.5
------------------------------------------- ----------- ----------
Minority Interest 0.2 0.6
--------------------------------------------- ----------- ----------
Shareholders' Equity:
Share capital 54.8 54.7
Reserves 42.3 42.3
Additional paid-in capital 8.3 8.3
Retained earnings 306.2 373.5
Total shareholders' equity 411.6 478.8
--------------------------------------------- ----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 617.5 674.7
--------------------------------------------- ----------- ----------
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NATUZZI S.P.A. AND SUBSIDIARIES
Unaudited Consolidated Statement of Cash Flows
as of December 31, 2007 and 2006 (Expressed in millions of EUR)

31-Dec-07 31-Dec-06
--------- ---------
Cash flows from operating activities:
Net earnings (losses) (62.6) 12.3
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 30.8 30.5
Employees' leaving entitlement (1.9) 2.9
Deferred income taxes 8.5 (2.1)
Minority interest (0.5) (0.1)
(Gain) loss on disposal of assets 1.3 0.8
Unrealized foreign exchange (losses) / gain 4.5 (10.2)
Deferred income for capital grants (1.0) (1.1)
Change in assets and liabilities:
Receivables, net 1.5 4.3
Inventories (6.9) 15.5
Prepaid expenses and accrued income 0.1 0.6
Other assets (3.1) 1.4
Accounts payable 9.7 6.0
Income taxes (3.0) 1.7
Salaries, wages and related liabilities (4.1) (0.4)
Other liabilities 11.6 4.8

Total adjustments 47.5 54.6

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (15.1) 66.9
-------------------------------------------------- --------- ---------

Cash flows from investing activities:
Property, plant and equipment:
Additions (26.7) (20.0)
Disposals 0.5 0.3
Government grants received 0.0 0.6
Marketable debt securities:
Proceeds from sales 0.0 0.0
Purchase of business, net of cash acquired (0.2) (3.3)
Disposal of business 0.0 0.0
NET CASH USED BY INVESTING ACTIVITIES (26.4) (22.4)
-------------------------------------------------- --------- ---------
Cash flows from financing activities:
Long term debt:
Proceeds 0.0 0.4
Repayments (0.3) (1.6)
Short-term borrowings 3.8 (4.0)
Dividends paid to shareholders 0.0 0.0
Dividends paid to minority shareholders 0.0 0.0
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 3.5 (5.2)
-------------------------------------------------- --------- ---------
Effect of translation adjustments on cash (2.6) (0.9)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (40.6) 38.4
-------------------------------------------------- --------- ---------
Cash and cash equivalents, beginning of the year 128.1 89.7
CASH AND CASH EQUIVALENTS, END OF THE PERIOD 87.5 128.1
-------------------------------------------------- -------------------
*T

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