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Natuzzi: An Undiscovered Italian Gem


Inside Wall Street

NATUZZI: AN UNDISCOVERED ITALIAN GEM

Like many other wary pros these days, money managers Allan Raphael and Arthur Lerner think the grass is greener overseas--including Italy, which they admit isn't attracting too many American investors lately. "But if you take the time to look at individual companies in Italy, you'll find a Natuzzi," says Raphael. He's referring to Industrie Natuzzi, the uorld's largest designer and manufacturer of contemporary leather-upholstered chairs and sofas.

Natuzzi is an example of a still "undiscovered gem" in the global market, which has the promise of becoming a blue chip, say Raphael and Lerner, co-managers of the First Eagle International Fund, a mutual fund formed recently by the New York securities firm Arnhold & Bleichroeder.

"Certainly we expect Natuzzi's stock to become as hot as its leather sofas," says Raphael. Natuzzi went public in the U.S. in May, 1993, at 15, and its American depositary receipts are now trading on the Big Board at 27. Raphael and Lerner figure the stock is still way undervalued: They expect it to hit 60 in about two years.

Natuzzi exports 96% of its output to the U.S., Asia, and other countries in Europe. Based in the Southern Italian town of Santeramo, Natuzzi is "unrivaled" in the furniture industry for high-quality products, manufacturing automation, and employee loyalty, notes Raphael.

PLUMPED UP. These factors have fostered impressive sales and earnings growth, he adds. Overall sales have increased at a 17% annual rate over the past five years, while net income has grown nearly 32% annually. Last year, Natuzzi's worldwide sales jumped 39%, to $271 million, and its earnings per share jumped by 78%--from 77 cents to $1.37.

This year, Raphael expects the company to earn $1.75 a share and $2.10 in 1995. Sales, he figures, should balloon to $310 million this year and to $370 million in 1995.

In the U.S., Natuzzi supplies 20% of the market for leather furniture. Major customers include Federated Department Stores, R.H. Macy, Sears Roebuck, May Department Stores, and Montgomery Ward. In early 1994, Natuzzi introduced a limited line of fabric-upholstered furniture that's being test-marketed in Europe.GENE G. MARCIAL


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