Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Natuzzi third quarter 2022 financial results conference call. As a reminder, interested people can join the call live by dialing in +1 412- 717- 9633, then passcode 39252103 pound. Once again, if you'd like to join the call live on the phone, please dial +1 412- 717- 9633, then passcode 39252103 pound. In addition to the link already provided to join via video. At this time, all participants are in a listen only mode. Following the introduction, we'll conduct a question and answer session. The instructions will be provided at that time for you to queue up for questions.
Joining us today on the call are Mr. Antonio Achille, Natuzzi's Chief Executive Officer, Mr. Pasquale Natuzzi, Founder and Executive Chairman, then Mr. Jason Camp, President of Natuzzi Americas, and Piero Direnzo, Investor Relations. As a reminder, today's call is being recorded. I would now like to turn the conference call over to Piero. Please go ahead.
Thank you, Kevin. Good day to everyone. Thank you for joining the Natuzzi's conference call for the third quarter 2022 financial results. After a brief introduction, we will give room for a Q&A session. Before proceeding, we would like to advise our listeners that our discussion today could contain certain statements that constitute forward-looking statements under the United States securities laws. Obviously, actual results might differ materially from those in the forward-looking statement because of risks and uncertainties that can affect our results of operations and financial condition. Please refer to our most recent annual report on Form 20-F filed with the SEC for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call. Now I would like to turn the call over to the company's Chief Executive Officer. Please, Antonio.
Thank you, Piero. Good afternoon, everyone. Thank you for joining our third quarter press release. Let me share a few highlights on the third quarter, but also as we are facing at the end of the nine months of 2022. The third quarter closed with a positive tone, both in term of revenue. We reported revenue of EUR 160 million, which means an increase of almost 15% versus 2021. Which as you remember, was a strong year for us, with an increase of 30% versus 2020, and an increase of 32% versus the year 2018, which can be considered the last year of normality before the pandemic. I also would like to flesh out the growth of the branded business.
As you know, Natuzzi operate two main brands, Natuzzi Italia. That revenue were EUR 103 million with an increase which is higher than the average increase of the total revenue of 22.5% versus 2021, and 57.6% versus 2019. This means that the branded business is growing faster than the overall revenue, which is very consistent with the strategy that Pasquale Natuzzi, our Chairman, initiated a decade ago to transform the company to a brand lifestyle company and a retail company. One of the priority we gave ourself with also my new mandate is working on marginality to extract more value to be reinvested in the business, but to extract more value also for the benefit of the investor, majority investor and every investor.
When it comes to marginality, we closed the quarter with a 37.7% margin, which compare with 36.6% of 2021, and with 28.7% of 2019. Versus 2019, almost 10 additional percentage points of marginality. This in a year which has been still characterized by significant increase in cost in some of the materials and a true spike in the energy cost. As a result of those element, let's say a continued growth and a better marginality, we closed the third quarter with EUR 4.1 million profit, which compared with a loss of EUR 0.4 million of the third quarter last year, and a loss of EUR 8.7 million in 2019.
Quite a significant improvement during the third quarter. If we look at the nine months of 2022, the profit has been of EUR 6.7 million, which compare with EUR 4.3 million in 2021 first nine months. It's important those to remember that in 2021, Natuzzi, as all, let's say, major company, benefit for COVID-related measure, that in our case, in the first nine months, amounted to EUR 4.2 million. If we want to compare. The profit of the first nine months of 2022 versus 2021, the improvement netting the one-off COVID-related measure has been very significant. Clearly, much more significant versus 2019, where the first nine months ended with a loss of EUR 19.5 million.
When we look at the profit per American Depositary Receipt, which is basically what every one of you owns, that means that we close with EUR 0.50 of profit per share, per ADR, per American Depositary Receipt. Which is to be compared with a loss of EUR 0.35 in 2021, and EUR 1.05 in 2022. From the very beginning, we discussed in our call that the priority for our business is to create value for our shareholder and for our employees and for our customer. This is somehow happening. Cash wise, we go to a position which is very similar to what we had at the end of last year.
Last year, we closed with EUR 53.5 cash. This quarter, we closed with EUR 53, almost exactly the same. This despite the fact that we are adding some more inventory due to the slowing of the business. In that sense, I hope you appreciate our effort to manage the company in a way to extract more value and to have a more tight cash management. Clearly is a very early day. We don't want to be celebrating any success, but I believe the numbers show that the work is paying some results. I want to also like, in a very candid manner, that the trend that we already discussed in the last press release, which means the slowing down of the business since April, has not reverted the trend.
Both in our retail and in the business with our clients, we see a pace of new order which are below our expectation, which means our budget. We could keep comparing notes with the remaining player in the industry, and we see this is quite a general trend given whatever is happening around us, which I believe at this point is even redundant to repeat. We don't take, of course, this as an excuse. We are working very hard. We're also taking some changing in our organization, most notably in our wholesale team in U.S. and also in our European emerging market team to reinforce our team and to make sure we stay closer to our existing clients. Also to reinsert new clients selectively to strengthen our pipeline of business.
This a bit the executive summary. I will say a quarter which end up on a positive note. Unfortunately, we're experimenting quite a strong headwinds, which is not helping our turnaround. We are very committed to continue the growth journey, which is part of our five-year plan. We need to acknowledge that is happening in a market context which is not necessarily favorable. We know the industry is difficult, we definitely hope that it's not gonna be lasting forever. We're working so that despite this headwinds, we keep our business up and our factory busy. Just providing an additional few lights on our cost structure before opening to Q&A. When it comes to G&A, there's been a better solution and also as G&A given our business leverage.
When it comes to raw material, is noticeable the spike in energy. As I mentioned before, we had an extra cost of EUR 2.8 million for energy. Material is a bit, you know, a multifaceted dynamics. Leather is improving the cost. Fabric and metallic part are still on the rise because those industries themselves use a lot of energy in the production, so they pass the additional cost to their client, which in this circumstance are players like us. The other point to note is transportation, which is normalizing, not yet at the level of 2018, but especially from China to U.S. Vietnam to U.S. has been steadily reducing and allowing us to be competitive again from those platform. This is a bit the executive summary I wanted to provide. Let me stop here for observation and question as usual.
Thank you. We'll now be conducting a question-and-answer session. If you've dialed into the phone and you would like to ask a question, please press star one on your telephone keypad. You also have the option to click on the Ask a Question feature and raise your hand on the web platform. One moment please while we pull for questions. Our first question today is coming from David Cannon your line is now live.
Good morning. Can you guys hear me?
Yeah, David. We hear you very well.
Okay. Well, first, congratulations. I know, the quarter didn't turn out exactly as you would like and some of your long-term potential, but to earn EUR 0.50 per ADR is certainly an accomplishment and demonstrates how undervalued the company is. Congratulations, and it's encouraging to see what the potential is long term. Couple of questions. One of your comments in the press release is in response to the tough market conditions, we've launched a set of actions to lower the cost of our G&A, tightly manage our working capital and protect our cash position.
Could you speak specifically to what's going on in terms of lowering the cost of G&A? And, you know, implicitly, what it tells me is that there's more leverage in our financial model to the upside during periods of normalization. If you could just quantify that for us and give us some specifics as to the areas that you're targeting.
Thank you for the positive note and encouragement, Dave. We know that you have been a long-term investors, and that's come from a deep understanding of our business. I appreciate it. When it come on management of our cost, we went back to basic in the sense that in 2018, the company also with external support from McKinsey, put together a process to manage in a tight way the restructuring cost, looking at any individual dollar which has been spent across all category, which include, you know, purchase, transformation cost, industrial cost, G&A, the quarter cost. We have replicated that methodology internally. I was part, of course, of the McKinsey team there. A lot of people also here are already Black Belt on that methodology.
We have a weekly meeting, we have accounted around 13 responsible, which, as you can imagine, are the typical functional responsible. We have put down a citizen initiative to tightly manage the different cost and also the working capital. I can give you a few examples. One is really around streamlining, accelerating restructuring in a quarter, where we identified, you know, potential to accelerate the right sizing of the quarter. Also as a way to allow to bring in new capabilities. We are looking at all possible way to reduce the impact of an additional energy cost on our factories. We are relenting all our factory. We are reviewing the processes.
When it come to working capital, we are applying a lot of scrutiny at all the different working capital that we have in the company, which means the raw material that we have, which means also the finished product that we have in some of our geography. We are having really tight management of those items to ensure that there is no cash trapped in those area. We are addressing also some more structural opportunity like the simplification of our offering.
Where we want to be very compelling and appealing to the consumer, but we also acknowledge that there is a lot that can be done to simplifying the covering assortment, the way in which we make intermediate stock on that level. It's a kind of holistic approach managed with a tight methodology, where every week we appreciate the progress, we intervene to change and resolve a situation that need to be accelerated.
Can you quantify what the cost savings are in terms of millions? Is it a low- single- digit, mid- single- digit, or high- single- digit number when it's fully implemented?
Jason, please, can you put mute? We are receiving a lot for all of the message or whatever we're getting from. I think if we just look at the third quarter, also to compensate the slowdown in revenue, we're looking at a material potential impact. On the order of EUR 3 million-EUR 4 million for a quarter, which doesn't mean that we'll increase the EBIT, it means that will also allow us to, you know, counterbalance the negative effect of the loss of revenue momentum. I believe this is a company which has sustained. We know that. We've always been mentioning the opportunity around restructuring. This is a company which has an opportunity to manage in a more tight ways business, and the opportunity per se of that can be quite substantial, quite substantial on a, on a yearly basis, can be quite substantial.
Okay. In the press release, you referred to the impairment of a trade receivable, which increased SG&A. What was the dollar amount of that?
I will pass over to Piero for that. He's hoping that he has the answer.
In terms of trade receivable, it is literally in the table.
Okay, can you provide the amount of trade?
Yes. It was EUR 0.1 million for that third quarter.
Okay. Quick question for Jason. In North American DOS, like- for- like, how did we do?
You know, we're spending a lot of time looking at both kinda how we're comparing to 2021 and to 2019. When you look at year to date, we're trending down 8% to 2021 and +50% to 2019 year- to- date.
Okay, thank you.
Like- for- like.
Okay. Then, final question, Antonio. You've referred in the past to your Factory 4.0 sequential rollout. Can you give us an update on that? In the past, you referred to a mid to high- single- digit improvement in gross margin once that's implemented. Where are we and when do you expect that to be fully rolled out?
I confirm that is the range of the potential ceteris paribus, which means that if the factory are directly saturated, they operate with the right level of saturation that in our business means 80% +. The application of that approach of working, which more than technology is a way of having a lean manufacturing way of organizing the flow, can produce the kind of result. The plan is to allow that most, you know, most of our factory, Italian factory by next year. As we're also considering a potential location of the factory in China to make sure the new plant can be fitting this new approach of working. Then the next wave will be Romania and our Brazil operation. That can be the benefit.
I need to be again candid here because, before modeling the benefit and the margin, we need to acknowledge that the reduction in volume is also resulting in a reduction of factory utilization, which being a fixed cost business, of course, has a direct impact on the cost per units. We are even working harder on the Factory 4.0, because we see not only in long term, something we deeply believe on, as an opportunity to enhance margin, but also as an opportunity short term to counter fight the potential negative impact on cost per units deriving from a lower capacity utilization of our factories.
Okay. Well, thank you. I appreciate the commentary. Good luck. You guys have a nice holiday.
I was definitely gonna talk before holiday. We will do holiday after the plan is completed. In 2077, we do holidays.
Thank you. As a reminder, if you'd like to verbally ask a question over the phone, please press star one at this time or use the Raise Your Hand function on the web platform to ask a further question. One moment please, while we poll for further questions. If there are no further questions at this time, I'll turn the floor back over for any further or closing comments.
I feel I've spoken enough. I leave the floor open maybe also if Pasquale want to comment or Piero or Jason, then I would do a summary myself. I also want to leave the floor open for, you know, the Chairman and the rest of the team if they want to comment anything, and then I do my final remark.
You gave plenty clear explanation, Antonio, for what we are doing and what is happening. Probably what we missed to explain, probably I'm wrong, is that, you know, in order also to reduce G&A, you know, we are reviewing the organization, consolidating some organization, like for example, the Southwest Europe market together with the, t he MENA market.
Market, under a single, regional manager, and also aggregating and synergizing the customer care and other function. I mean, you know, reviewing the organization aggregation certainly will allow us to improve the service. Improve, I mean, and reduce the cost. This is something that we are solving, you know. For the rest, you gave all the major explanation, Antonio. Okay?
Thank you, Pasquale. That has been a very appropriate comment on your side. In closing, I want to restate how committed we are. We are really working as one team with just one strategy. The Chairman, myself, here you see Jason, our leader in North America, but also the remaining of our team. We're very crazy. We're very committed on the long-term plan. We know that there are challenges ahead of us, but we are very fit for those challenges. We have a good case position. We ensure the company's managed adequately on that front.
As I mentioned before, we're gonna be stepping up in term of aggressiveness on cost reduction as due to this phase and as everyone you have seen is doing also starting from the largest of company in U.S. This is the, let's say third quarter result in term of strategy long term, nothing had changed. We're still committed to make Natuzzi the most successful high-end European brand globally. I believe that with the current strengths of the brand, the current heritage of the brand, this is something is due and is also achievable. Having said that, thank you so much for your attention. I wish you a great continuation of the day, and I hope to reconnect soon in our next press release.
Thanks.
Thank you. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.