Obviously with a steep decline in earnings NTZ will pay less tax so let's go back to the part about taxes. If Natuzzi had been paying taxes in the last three years according to the tax laws they will have to obey in the future they would have paid: E49m off of E116m in 2002 E42m off of E98m in 2001 E47m off of E105 in 2000 The average effective tax rate would have been: (49+42+47)/(116+98+105) = 43%
Putting it all together:
Hypothetical: Over the last three years Natuzzi operated in an environment where the USD/EURO exchange rate was constant at 1.15 and where they had to pay 43% of operating income as taxes. The exchange rate was stable so operating income was neither decreased nor increased by hedging gains.
Average for 2002, 2001, 2000
Operating income: E65m Taxes paid: E28m Net Income: E37m
54.682 million shares changing hands at about $10 means a market cap of $547m. Today's USD/EURO exchange rate 1.20. Market cap in euros, 547/1.20 = E456m. P/E = 456/37 = 12.3. P/E after backing out E70m of cash on hand, 10.4. Hardly expensive, but not quite the 20% earnings yield steal it looked like at first.
Conclusion: I have had to make some problematic assumptions in projecting back the altered exchange rates but I can't do much better with the info I have got. That said I don't see a particular bias.
Also, I think that the tax rate (43%) is a little higher than what we will see in the next few years although I got my numbers from their 20F where they reconcile what they should have paid with what they did. The key causes of the big discrepancy were income tax sheilds for key companies which have since expired, I worked therefore under the assumption that if the sheilds had not been in effect then they would have paid what they "should have paid". In the 3rd Q conference call they advised a 38% effective tax rate going forward. If you plug this number in above instead of the 43% I used net income is increased E3m to E40m.