Full Year 2024 Davide Campari-Milano NV Earnings Call

March 4, 2025

As a reminder, all participants are in listen only mode.

After the presentation, there will be an opportunity to ask questions should anyone need assistance during the conference call. They may signal, an operator by pressing star and zero on your telephone.

Simon Hunt: Today's call will be hosted by Mr. Simon Hunt, Chief Executive Officer, and Mr. Paolo, Mike Cassini, Chief financial and operating officer.

Magazine: I will now hand, you over to Mr Magazine. He please go ahead Sir.

Magazine: Good evening, good afternoon to everybody I am pleased to be here again with all of you to review our 2024 results and give you our initial perspectives for fiscal year 2025.

More than happy to be joined here by Simon, whom I leave the floor.

Magazine: In a few seconds.

Magazine: I wanted to highlight that we have intentionally tried to keep this presentation. If it is possible to leave ample room for questions.

Speaker Change: Of course, and as always the Gara and <unk>.

Magazine: IRT.

Speaker Change: Happy to connect.

Speaker Change: Our call to further deep dive with all of you in the upcoming days if needed.

Simon floor is yours.

Simon Hunt: Thanks, Carlo I'm very happy to be with you today.

I'm sure you. All know this is my second month in this role and it's been a busy but exciting period.

Simon Hunt: I've had the chance to meet with many of our colleagues around the world already and deepen my understanding <unk>.

Speaker Change: His business.

Speaker Change: <unk> already has an impressive competitive advantages.

Speaker Change: <unk> culture people shareholder structure and.

Speaker Change: An enviable brands.

Speaker Change: And I believe I can bring in different optics to support and extracting its full potential.

Speaker Change: I'm very much looking forward to meeting many of you in the next weeks or months in person.

Speaker Change: And sharing more regarding our roadmap ahead towards the summer where we'll be in a position to give you a deeper perspective.

Speaker Change: Now a short summary of how we see the environment and our positioning.

Speaker Change: As all of you know 2024 was a tough year marked by significant macroeconomic and geopolitical volatility some of which remains today.

Speaker Change: It has created pressure on our sector across all regions in different forms.

Speaker Change: Moving to an impact on consumption patterns.

As well as significant destocking across the trade.

Speaker Change: On top of this we were faced with very poor weather conditions, especially in Europe.

Speaker Change: Tough mix of events to manage.

Speaker Change: All of this created a challenging backdrop and low visibility during the year.

Speaker Change: But despite this we delivered positive results with plus two 4% organic top line and plus five 2% total growth with ongoing outperformance versus the sector.

Speaker Change: I understand the expectations to 24 at the beginning of last year were higher than looking back at everything that happened. This is in my opinion.

Speaker Change: Solid results and really shows the resilience of our teams our brands and our capabilities.

Speaker Change: During the year, we executed the planned investments to further strengthen our frontline our systems and our supply chain capabilities.

Speaker Change: Which clearly had an impact on profitability given the more muted than expected topline growth.

Speaker Change: At the same time this period gave us the impetus to look internally.

Speaker Change: To evolve, how we work and focus on increasing efficiency and reinforcing our focus on our priority brands for the future.

Speaker Change: The solid performance in Q4, both in terms of top line at plus three 4% as well as gross margin of 40 basis points.

Speaker Change: It was driven by better trends in Europe, and our priorities following weak peak season.

Speaker Change: Which also supported by the positive impact of cost, especially due to the agave costs.

Speaker Change: Current low visibility on how long these cyclical headwinds were loss.

It means we view 2025 as a transition year.

Speaker Change: This means ongoing softening topline growth.

Speaker Change: While we continue our full focus on efficiency and execution.

Speaker Change: We are doing this without compromising our growth investments both in terms of the commercial teams as well as brand building.

Speaker Change: While focusing on operating deleverage and effectively managing our balance sheet.

Speaker Change: To summarize this has been a challenging and will continue to be a challenging year in 2025.

Speaker Change: But we operate in a highly profitable and attractive sector.

Speaker Change: And our unique positioning makes us very confident for the future.

Speaker Change: We will execute strategic actions to deliver long term sustainable market outperformance with our existing unique brand portfolio.

Speaker Change: This means digesting, our acquisitions and growing the brands we have.

Speaker Change: An easing off M&A for now.

Speaker Change: We're going to remain focused on what we can control like efficiencies cost control execution.

Speaker Change: And take actions to mitigate impacts what is beyond our control like tariffs, which we'll comment more on later.

Speaker Change: Before deep diving into 'twenty four we wanted to start by giving you a bigger picture, we've been able to record strong topline growth for the last 20 years through evolving market conditions.

Speaker Change: And this has been achieved by a focused approach leveraging our strong brand portfolio.

Speaker Change: Just to highlight here that of course, the priorities is critical part of our story and it will continue to be but in the meantime, we have diversified and strengthened our portfolio.

Speaker Change: For example, the story of Epsilon, starting with almost nothing and now being a significant contributor to the group's performance and an acceleration of growth.

Speaker Change: Certainly these last five years has been disruptive for the sector, but at the same time on aggregate.

Speaker Change: It allowed us to reach bigger scale than our normal run rate pre COVID-19 rate would have.

Speaker Change: Our topline reached $3 1 billion for us its level 20 years ago.

Speaker Change: Our pre Covid run rate of plus 5% would have been $2 5 billion. That's an additional 600 million we have added to our scale in this period.

Speaker Change: Following a transition period in 2005, we believe our growth story and potential to gain market share is solid for the medium term.

Speaker Change: We still have low penetration across many geographies.

Speaker Change: We have an enviable brand portfolio that is aligned with where consumer trends are moving.

Speaker Change: Binding power icons and authorities and distinctive brands in high potential categories like Epsilon.

Speaker Change: Okay.

Speaker Change: With the investments we've made to enlarge our route to market footprint and build capabilities with our new house of brands model.

Speaker Change: We are now positioned well to benefit from the evolution of consumer trends in our sector in the upcoming period.

Speaker Change: So now let's have a look at 2004 trends in more detail overall, we record a resilient performance with two 4% organic and five 2% total growth.

Speaker Change: The latter mainly due to the additional contribution of <unk> with limited FX impact.

Speaker Change: In terms of regions, we've seen resilient growth in both of our main regions, the Americas and EMEA.

Speaker Change: And moving to the brand's first the states Youll see a different composition of brands here and in the past and to the rest of the document as we've now transitioned the previously announced household brand structure.

Speaker Change: The main growth drivers have been the houses of our priorities on agave with plus six and plus 10% growth respectively.

Speaker Change: As well as the house of Cognac in Champagne with plus 3% of course, excluding <unk> since it's in perimeter until may this year.

Speaker Change: In terms of sell out versus sell in we have recorded balanced trends across our major regions with solid ongoing performance driven by our key accelerator brands, including the authorities and Epsilon.

Speaker Change: In the U S. We outperformed across all channels and sell out.

Speaker Change: Plus 2% outperformance in off premise.

Speaker Change: 4% points, and Natca and plus six points in a strategic on premise in the world's most profitable market.

Speaker Change: And we did this while maintaining pricing discipline, despite the market pressures.

Speaker Change: In EMEA in Germany has been the strongest market, while Italy, and France had a challenging peak season due to the poor weather.

Speaker Change: UK was positive on sell out despite the impact of the Jamaican rums supply shortages, mainly driven by the authorities.

Speaker Change: But focusing on the Americas of the total organic growth of plus 4%. The U S was stable impacted by the subdued market context.

Speaker Change: In particular Q4 had a tough comp with a base of plus 13% last year, leading to a negative Q4 on a year on year basis.

Speaker Change: While Apple and Epsilon saw solid growth plus 12, plus 11, respectively.

Speaker Change: Overall growth was brought down by pressure on Sky and.

Speaker Change: Softness and while Turkey.

Speaker Change: In Jamaica Q4 saw a return to growth after the impact of the Hurricanes on production and also on local consumption in Q2 and Q3.

Speaker Change: The plus 1% annual growth, we recorded would've been mid teens without this impact.

Speaker Change: Production is now back to normal as of February and our environmental investments done the water treatment facility will be finished in Q2, we will make us more resilient to future potential climb ethics shocks.

Speaker Change: The rest of Americas continued solid performance in Q4 and closed the year with plus 14%, mainly driven by the Brazilian brands Campari and alcohol.

Speaker Change: And this clearly shows the potential of our brands is truly widespread across the Americas.

Speaker Change: Now moving onto EMEA, we recorded plus 3% organic growth for the year with a catch up in Q4, following a challenging peak season.

Speaker Change: All countries were positive in Q4, except for the UK, which was flat.

Speaker Change: And focusing in on Italy, we've already explained the three key reasons for the performance in 'twenty four but just to recap we have a commercial dispute in Q3 around $10 million impact.

Speaker Change: We had destocking in the trade due to subdued consumption patterns and the cost capital.

Speaker Change: And finally, we had poor weather conditions in the peak season as you know.

Speaker Change: As we stand today, the first is resolved.

Speaker Change: Stock in the trade is at healthy levels, although there are still some macroeconomic pressures and.

Speaker Change: As for the weather, we will see how the season develops this year.

Speaker Change: In any case, the brand health and strength of our portfolio remains strong.

Speaker Change: And one other important point is that the other countries in Europe, which contributed 15% of our overall sales continued to grow strongly with plus 12% organic growth in 2024.

Speaker Change: The biggest drivers of GTR in Greece, but also other countries like Spain, and the Netherlands further reinforcing the market expansion opportunities for our portfolio across EMEA.

Speaker Change: Okay and moving onto APAC 24 was marked by both external challenges like the challenging operating environment in Australia and China.

Speaker Change: As well as negative impact of some of our own actions like the route to market changes we've implemented over.

Overall, we recorded minus six organic growth in our smallest region, but with Q4 returning to growth with plus four.

Speaker Change: Australia in particular was impacted also by our decision to decrease co packing activities.

Speaker Change: Excluding which our full year performance would have been flat with growth driven by the authorities offsetting some of the pressure on the wild Turkey, RTD that we've seen from white spirits RTD.

Speaker Change: And to benefit from this trend, we've launched our own Epsilon RTD, which is small but growing nicely off a small base.

Speaker Change: In the rest of APAC, China, and India contributing positively in Q4 following route to market changes, which weighed on performance previously.

Speaker Change: And brown spirits, including both portal and RTD formats, performing well across Japan, China off a small base.

Speaker Change: Okay.

Speaker Change: As I previously mentioned, we've transitioned to the house of brand structure as of 2025 and this is a structure that I believe is very conducive to a more focused and structured growth among our categories. While also creating efficiencies. This.

Speaker Change: This way the MTS of the houses with champion their brands, while the region to champion their markets, creating a healthy tension between the two and also allowing us to better leverage geographic expansion opportunities, while optimizing brand building investments.

Speaker Change: So first looking at the house of authorities, we had a solid performance in Q4, which pulled the full year organic growth to a solid plus 6% helping.

Speaker Change: Helping to offset some of the impact of the weather challenge peak season.

Speaker Change: Apple had double digit growth in Q4, driven, especially by the U S, Germany, and Italy, its top three markets, indicating that its brand health is strong and healthy.

Speaker Change: We'll dive more to this in the next page.

Speaker Change: <unk> closed the year with plus 9% growth driven by the Americas as well as some of the priority markets in EMEA.

Speaker Change: Showed that the negroni trend and progressively increasing campari spritz trend is continuing.

Speaker Change: And Kadena, our non out continues to grow off a small base, but will focus more here in the future.

Speaker Change: The rest of our <unk> team is also growing nicely supporting our leadership position in the apparel category globally.

Speaker Change: So to give you more holistic perspective on the positioning of Apple and the potential for growth going forward. We included on this page a few additional details.

Speaker Change: In the first chart you can see the increasing diversification of Apple over the last 10 years.

Speaker Change: From being largely Italy heavy the competition has become more balanced over the years with the U S in new geographies, becoming more important.

Speaker Change: However, the top six markets still contribute 70% of the total.

Speaker Change: And while we believe there is still a significant opportunity to grow in those six markets.

Speaker Change: We're also just starting to leverage the route to market capabilities around the world and new markets.

Speaker Change: On the next chart you can see that we still have a significant opportunity to drive awareness and trial, especially in the U S. The biggest market.

Speaker Change: Even in parts of the country, where we have been activating for longer the.

Speaker Change: The awareness of the brand is still very low.

Speaker Change: One in two U S consumers have never heard of Apple, which is a massive opportunity for us.

Speaker Change: Another important indicator is per capita consumption.

Speaker Change: Especially compared to our most mature market Italy.

Speaker Change: Since 2019, there is a solid evolution and improvement in per capita consumption across the largest six markets.

Speaker Change: But the levels are so low.

Speaker Change: Again, focusing in on the U S. You can see that overall is very low.

Speaker Change: And also in the 10 strategic states, where we've been focusing the per capita consumption is still below 10% 10%.

Speaker Change: Of the per capita consumption of Italy.

Speaker Change: Just to put it in context, if the U S was to get from the 4% today is today to 20% of Italy's Apple per capita consumption.

Speaker Change: The additional volume generated would be net sales of <unk> globally.

Speaker Change: Be between 45% to 50% higher just on achieving this in the U S alone let alone all the opportunities we have in other markets around the world.

Speaker Change: But with that said of course and the challenging 2004 period, Apple also got impacted to a certain extent.

Speaker Change: But the brand health is in place the profit pool is huge including not only spirits, but also wine beer and RTD.

Speaker Change: And it hits perfectly in the consumption occasions, which are becoming more and more important in line with consumption trends.

Speaker Change: So when you look at the potential coming out from market diversification awareness penetration and the digital presence of the brand the medium and long term opportunity to replicate the success, we've had in Italy across other markets is crystal clear.

Speaker Change: In terms of our performance in whiskey, there was the impact of the challenging category trends in competition in 'twenty four.

Speaker Change: Turkey has been especially impacted in its core market Australia.

Speaker Change: There have been some positive trends in other markets and in Russell Reserve.

So the Jamaican rums, the main impact of being supply constraints and the impact of the hurricanes on local consumption in Jamaica.

Speaker Change: All of that is resolved, we expect more stabilized trends going forward.

Speaker Change: The lying brand health of the portfolio remains strong and its core Jamaican market.

Speaker Change: In our house Mcgarvey clearly our focus is on Epsilon, which grew plus 14%. This year. Despite the impact of normalization of wholesale inventories in Q4.

Speaker Change: So let's move onto the next page to deep dive into <unk> a bit further.

Speaker Change: <unk> has been a meaningful success story and a rapidly growing and crowded tequila category.

Speaker Change: Growing from almost nothing 10 years ago, and gaining 12 points of ranked become a number seven largest tequila.

Speaker Change: Significant outperformance at the category in the U S. It's core market.

Speaker Change: It is uniquely positioned at the right price point.

Speaker Change: Price points and right quality profile and the brand power also remains strong as it is perceived as cool and innovative.

At the same time, it's got about a 4% volume market share. So it's still relatively small compared to the larger brands in the category signifying potential room for further growth.

Speaker Change: You can also see from this page that the share of other markets. In total is still very limited at about 9% of total SBA loan sales.

Speaker Change: And then started growing very fast in the recent period with increased attention to Canada and other markets such as U K, Canada.

Speaker Change: And Australia, as well as well as European markets like Italy for.

Speaker Change: For example, recently Theres more and more focus on tequila, and Paloma in Italian articles, which fits very well with the refreshing high baud alternative in the growing consumption occasions.

Speaker Change: And we're going to be focusing on being one of the front runners to lead this trend internationally.

Speaker Change: Lastly on the varying composition the increasing relevance of the brand is also evident from the increasing share of the more premium and higher margin skus like <unk>.

Speaker Change: <unk> in total up from 30% in 2019% to 41% today.

Speaker Change: Okay.

Speaker Change: So grow ammonia, we saw subdued growth in a competitive and muted market backdrop as we started positioning the brand more effectively among its main consumer pool in the U S, which recorded plus 3% growth during the year five partnerships, including a new one with Grammy Award winning rapper future.

Speaker Change: <unk>, which as you know is still in perimeter given its consolidation as of May 24 will be included in our organic growth in may this year.

Speaker Change: The cognac market remained challenging across its main markets U S and China in 2024 and right now we are planning to phase in our launch plans given the market backdrop.

Speaker Change: In the meantime, we've created a structure and brought in important experts into our team.

Speaker Change: Our new MD of this house has extensive experience in one of the other important brands in the category.

Speaker Change: <unk> CMO and head of strategy the same in the other important brand and.

Speaker Change: And we also have the strongest bench of cardiac experts on our board.

Speaker Change: For us <unk> has a clear rationale.

Speaker Change: If we want to be in this category and we do we have to acquire one of the <unk> brand and that has a cost.

Speaker Change: It is an acquisition for the long term in a category that we believe in and it will take time to turn around but we have strong experience and we believe we can do it.

Speaker Change: For the rest of when comments, we must say that 25% of our overall portfolio is currently classified as local portfolio.

Speaker Change: Given that geographic concentration.

Speaker Change: Which by the way includes also agency brands co packing and bulk activities, which make up 15% of local portfolio and corresponds to about 4% of group sales.

Speaker Change: We've already shared with you our intention for some portfolio streamlining in the upcoming period.

Speaker Change: We'll share more on that when we can.

Speaker Change: Sky remains an important part of our portfolio as we redefine its positioning.

Speaker Change: So 900 in fact Apollo to go through the financial review.

Thank you Simon I'm, sorry, if you follow me to page.

Speaker Change: 17 of the presentation.

Speaker Change: As you can see at the top.

Speaker Change: The chart, notwithstanding a very tough year.

Speaker Change: That we have to say has been negatively impacted by macro weather conditions.

Speaker Change: Some severe supply shortages and a very painful commercial it is built in.

Speaker Change: In Italy, as well as some disruption due to change in leadership at the backend of the year. So in a perfect storm environment that group.

Speaker Change: Still delivered an EBITA adjusted at it was down and dropped by two 5%.

Speaker Change: Now if we carve out the negative impact deriving from the depressed the additional depreciation and amortization due to the extraordinary Capex program EBITDA was actually in value after organically by 0.5% and Sacha.

Speaker Change: Difficult conditions.

Speaker Change: Now.

Speaker Change: The performance is a positive two 4% net sales growth a positive growth in value of gross profit.

Speaker Change: The increase of 12, 4% A&P has been stepped up in value by one 1%.

Speaker Change: And so contribution after A&P was up in value of two 9%.

Speaker Change: Problem.

Speaker Change: <unk> sits on the SG&A that were up in 2024 by eight 6% in value, but we want to highlight the fact that.

Speaker Change: 55% of such SG&A increase was attributable to investments aimed at strengthening our commercial and marketing capabilities as well as the creation of venue in market company. So.

Speaker Change: Once you carve out that youre not.

Speaker Change: That asset is in.

Speaker Change: Inflation on existing structural costs and of course at the back end of the year, we've announced the cost cut cost cutting initiative.

Speaker Change: We're implementing as we speak that is aimed at containing SG&A as a percentage of revenues by 200 basis points.

Speaker Change: By 2027 with the first year of a 50 basis point SG&A as a percentage of revenues containment.

Speaker Change: Now if we move on and look at the margin performance.

Speaker Change: Seasonality satisfactory gross margin delivery for the full year on the back of a very positive.

Speaker Change: Fourth quarter gross margin as a percentage of sales recovery accounting for 40 basis points here.

Speaker Change: The tailwind that we were expecting for the year of 2025. So for current year have already materialized at the backend of last year, namely a roughly 10 million euros.

Speaker Change: Now if we wanted to.

Speaker Change: Really the key.

Speaker Change: Drivers of the flat gross margin.

Speaker Change: <unk> as a percentage of revenues.

Speaker Change: We're seeing a lot of positive pricing achievement, which is extremely good.

Speaker Change: Given the.

Speaker Change: The intense promo backdrop and such a positive pricing achievement.

Speaker Change: At ASUR offset a number of.

Speaker Change: Headwinds first and foremost the negative carryforward effect into 2024 coming from the absorption of 2023 high cost safety stock.

Speaker Change: Secondly, you know.

Speaker Change: Quite a negative sales mix in critical operatives peak season, Q2, and Q and Youll see that.

Speaker Change: <unk> had a lower absorption of fixed production costs due to the combination of lower volume produced on one end due to the absorption of safety stocks as well as the negative impact of higher depreciation due to past extraordinary capex aimed at expanding our production capacity on a positive note we are seeing.

Speaker Change: Darla.

Speaker Change: <unk> is on track in the fourth quarter of last year to achieve our goal of hitting.

Speaker Change: A breakeven gross margin as a percentage of revenues for the polo brand Ww.

Speaker Change: Roop.

Speaker Change: Gross margin as a percentage of revenues on the IP front A&P.

A&P as being contained by 20 basis points and full year.

Speaker Change: Due to as said the lower activation programs in peak season.

Speaker Change: In the peak season, which was clearly negatively impacted by very poor weather conditions now we flag.

Speaker Change: And in the mid term we aim at.

Speaker Change: So.

Speaker Change: Stepping up the A&P as a percentage of sales to the 70 net with the 17, 5%.

And that is where we see A&P branding on the meter.

Speaker Change: If you move on to the following slides.

Speaker Change: Starting from the.

Speaker Change: From the sizable operating adjustment that we flagged at $212 6 million euros of.

Speaker Change: Operating adjustments.

Speaker Change: <unk> from restructuring and reorganization cost accounting for $102 6 million euros. This is the whole cost for the three year cost containment program.

Speaker Change: We've done impaired intangible so brands by $56 8 million euros that is the cost tied to the business reset in Asia of 26 million euros.

Speaker Change: Sam.

Speaker Change: M&A fees for the quarter was the transaction accounting for $12 3 million euros and other Manny.

Speaker Change: Operating a minor operating adjustments relating to legal disputes in other indemnification.

Speaker Change: Now if you follow.

Speaker Change: The line of adjustments, we flag at $55 1 million euros of nonrecurring impairment of investments.

Speaker Change: As you know impairment of our stake into <unk>, which is the holdco of Antigua and rental appropriate it.

Speaker Change: We then have.

Speaker Change: On the back of the SaaS.

Speaker Change: Operating <unk> adjustment and nonrecurring impairment of investment of some tax relief positive tax impact of $92 8 million euros.

Speaker Change: And overall.

Speaker Change: The overall bottom line impact of such.

Speaker Change: <unk> expense accounts for $174 4 million euros after tax.

Speaker Change: The $174 4 million euros can be.

Speaker Change: Broken down into two buckets, the noncash impact of it is that 107 million euros and then we have a 67 million euros of cash.

Speaker Change: Cash flow outlays.

Speaker Change: Which 55 million euros have already acquired in 2024, so they are already.

Speaker Change: Factor into the year end.

Speaker Change: Net financial position, the remainder, which is 12 million euros is for year 2000 502006.

Speaker Change: And we signaled a negative impact of $37 million.

Speaker Change: 37 million euros in 2025, and a positive impact of 25 million euros in fiscal year 2026.

Speaker Change: Among the other many things.

Speaker Change: Financial expenses came in at $79 9 million euros are spot on with with our guidance and the average cost of net debt.

Speaker Change: At three 8% versus CPI, 3% of last year as we have already.

Speaker Change: Dissipated.

Speaker Change: Now.

Speaker Change: On the tax front beyond the over and beyond the tax relief of 92 million euros with signal our recurring tax rate of $29 8 million euros, which is up 190 basis point versus a year ago due to combination of factors first and foremost an unfavorable country mix and the <unk>.

Speaker Change: <unk> of select the trademark amortization for tax purposes, as well as the discontinuation of the incentive tax.

Speaker Change: Tax incentives in Italy by.

Speaker Change: Our new government the recurring cash tax our cash tax rate is 26, 6%. If you move on to the following page page 19.

Speaker Change: We highlight that I said before the fact that EBITDA adjusted the recovering one is up 0.5% $3 7 million euros.

Speaker Change: Versus a year ago, the recurring cash flow from operating activities before.

Speaker Change: Any change in operating working capital came in at 705 million euros, copper $122 7 million euros or 21, 1% due to cash phasing effects in primarily in in Italy.

Speaker Change: Regarding the free cash flow came in at 586 million euros up 519 million euros.

Speaker Change: Primarily due to <unk>.

Speaker Change: Positive Delta in the change of operating working capital of <unk> 24 versus 23 with a positive change in operating working capital saw a reduction in operating working capital of 78 million euros in 'twenty four versus an increase of operating working capital of 362 million euros in 2003.

Speaker Change: <unk>.

Speaker Change: Interest paid.

Speaker Change: Madison rally higher due to the higher in depth Anessa and maintenance Capex after 27 million euros to the level of $139 800 call. It 140 million euros now we signal additional extraordinary capex.

Speaker Change: <unk> really impacting fiscal year 2024 for 300 million euros, including the purchase of the new headquarter building in Milan costing $96 9 million euros for ear 2025.

Speaker Change: With flag.

Speaker Change: <unk>.

Speaker Change: The fact that the extra ordinary the multiyear extraordinary Capex program comes to an end with the tail end effect of extraordinary Capex support 200 million euros.

Speaker Change: We signal a recurring free cash flow conversion, which is quite high 80% and free cash flow free cash flow conversion before change in working capital is the sustainable one at prospectively at 69%.

Speaker Change: In line with the <unk>.

Speaker Change: Hi.

Speaker Change: <unk> average of 66%.

Speaker Change: If we move on to the following chart.

Speaker Change: Few key indicators.

Speaker Change: We see.

Speaker Change: Keep it format indicators, we see a very solid management of our operating working capital leader with.

Speaker Change: Operating working capital as a percentage of net sales on a like for like basis. So excluding who was it coming down from 37, 9% to 34, 6% saw a compression of 350 basis points that is coming on the back of the delivery of $122 million.

Speaker Change: <unk> of our finished goods comped.

Speaker Change: Compression as already highlighted which is being in a parity of sector.

Speaker Change: By a step up in AG and liquidity of 107 million euros to.

Speaker Change: Two.

Speaker Change: Support the future development of our whiskey.

Speaker Change: And Ron Paul portfolios.

Speaker Change: Within the operating working capital with flag another positive impact of net impact of 72 million euros coming from an increase in payables of 126 million euros in a shrinking.

Speaker Change: Sure.

Speaker Change: An increase in receivable side, I think as a receivable of 55 million euros.

Speaker Change: Then on the Capex that we said that 440 was the total amount of Capex spent in 2024 with 139 million euros of maintenance and 300 million euros in captain extraordinary.

Speaker Change: Free cash flow free cash flow conversion as said extremely stronger.

Speaker Change: Net operating working capital of 69%.

Speaker Change: And the recurring free cash flow at 586 million euros.

Speaker Change: Positively impacted by changing in operating working capital.

Speaker Change: The total.

Speaker Change: Free cash flow turn positive in 2024 with.

Speaker Change: A cash increase of 100 and.

Speaker Change: 73 million euros now on a positive note you'll see that we've managed to contain the net debt to EBITDA ratio by zero point return terms.

Speaker Change: From three five times to three two times.

Speaker Change: And we're expecting to continue our deleverage pattern or singing ear, 2025% notwithstanding the tail end effect of the 200 million euros the extraordinary cap.

Speaker Change: Capex I think this is it on the numbers I would hand back to your assignment for.

Speaker Change: Thanks Paolo.

Speaker Change: Some of the ESG initiatives and quick note because it's not important.

Speaker Change: A component of a fully committed to our ESG journey, but any quick in the interest of time little bit of sites for questions.

Speaker Change: So far we've recorded significant steps in this journey, we continue to have ambitious targets in developments, which will continue.

Speaker Change: One of the key developments is that for the first time, we're reporting a double materiality assessment in line with CSR D requirements and you can find the full details in our financial statements.

Speaker Change: We also became a signatory of the UN global compact this year and increased significantly our S&P global ESG racing to above the industry average.

Speaker Change: Also strengthen the structure of our operational sustainability Committee, which is made up of representatives from all of our key related teams within <unk> to ensure a coordinated response.

Speaker Change: Plus the Board Committee, which is company ESG changes <unk> from just control and risk to control risks and sustainability to reinforce our focus on governance.

Speaker Change: In terms of how we track ESG, we're focusing on four main areas environment responsible practices community involvement and people in all these areas, we have and will continue to take steps to ensure the attainment of our targets as well as to support and educate the community.

Speaker Change: So next is an update on our cost containment and portfolio streamlining, which we announced in our Q3 results call.

Speaker Change: On the cost containment, we've announced a target to achieve 200 basis points benefits on SG&A over the net sales in three years by 2027 and this is confirmed on the 2024 reclassified exit.

Speaker Change: Leading to operating leverage and a margin accretive profile and structure costs.

Speaker Change: There was some recent news in the market regarding the head count decrease but as the consultation process is currently ongoing.

Speaker Change: So in a position to give details on this topic.

Speaker Change: As you saw before we've recorded operating adjustments of $103 million and 24, which cover the majority of the impact expected over the three years prior accruals.

Speaker Change: On the actions, we're taking are supported by the house of brands operating model as well as a review of other areas such as the structures of our global functions and regions.

Speaker Change: Well as other people are non people related cost space with 60% of the actions already completed in the first two months of the year and benefits starting to be visible as of H two.

Speaker Change: On portfolio streamlining we don't have any further updates as I said currently we're looking at the opportunities with a view to ensure we optimize the potential proceeds we can get.

Speaker Change: Now moving onto the outlook first let's focus on 25.

Speaker Change: In the context of the current low visibility.

Speaker Change: The duration of the cyclical macro headwinds we view 25 is a transition year.

Speaker Change: Moderate organic full year top line growth will continue with an improving trend in H two.

Speaker Change: The timing of Easter will drive a phasing of shipments.

Speaker Change: Leading to a low single digit decline in Q1, mainly driven by the European markets.

Speaker Change: By Progressive improvements as markets continue to get back to normal consumption patterns in the balance of the year.

Speaker Change: We expect organic EBIT adjusted margin to be Directionally flat for the year driven.

Speaker Change: Driven by three things first the gross margin trend dependent on sales mix evolution. Despite the confirmed Cogs tailwind.

Speaker Change: And the step up of A&P from 16, 7% to a level within the historic normalized range of 17 to 17, 5%.

Speaker Change: And finally, SG&A containment program initiated with about 50 basis points benefit on sales and 25 phased into H two.

Speaker Change: Accordingly, EBIT adjusted performance to be skewed into <unk> due to adverse phasing of gross margin improvement.

Speaker Change: <unk> spend and SG&A savings.

Speaker Change: We're also estimating that the recently announced 25% tariffs being imposed on imports from Mexico, and Canada into the U S. <unk>.

Speaker Change: Will potentially create around 50 million euros annualized impact for us.

Speaker Change: If we also stimulate potential tariffs for Europe.

Speaker Change: The total could be between 90 to 100 million euros annualized impact before any potential mitigation actions, which are currently under assessment and to be clear are not included in the above guidance.

Speaker Change: For 2025, specifically the impact will be lower given the two months pass and we also have inventory in place therefore around a 35 million euro or impact from Mexico, and Canada before mitigating actions.

Speaker Change: In terms of medium long term outlook, we confirm our previous guidance.

Speaker Change: Confidence in continued outperformance and market share gains.

Speaker Change: Leveraging strong brands in growing categories with a gradual return in the medium term to mid to high single digit organic net sales growth in a normalized macro environment before the impact of potential tariffs.

Speaker Change: Secondly, gross margin expected to benefit from sales growth positive sales mix, driven by our priorities tequila and premium amortization across the portfolio as well as Cogs efficiencies.

Speaker Change: Thirdly EBIT.

Speaker Change: EBIT margin accretion in addition to the benefit on gross margin will also be supported by key company initiatives delivering 200 basis points overall benefit on SG&A as a percent of net sales in three years and increased efficiency in brand building spend.

Speaker Change: So let me finish by saying that again, we plan to come back and provide more details with you about our future plans towards the summer.

Speaker Change: I am currently meeting the teams getting to grips with all the details and then we will build on what we've shared so far with more specifics on our path forward and we can now open up for questions. Thank you.

Speaker Change: Thank you Sir this is chorus call conference operator, we will now begin the question and answer session.

Speaker Change: Anyone who wish to ask a question May press star and one on your Touchtone telephone to remove yourself from the question queue. Please press star two.

Speaker Change: Ask it at your handset when asking questions.

Andrew: The first question comes from Andrew <unk> of Bank of America.

Andrew: Yes, good evening, Simon and Paolo I have three please for your questions.

Andrew: First the first part.

Speaker Change: Probably all for Simon.

Speaker Change: You're confident of course, a comparator will continue to outperform the industry and with a lot.

Speaker Change: Lots of strong brands in the portfolio the potential you highlight for geographic expansion and I guess, even the low penetration that you're also highlighting and relatively low market shares in some markets like the U S. So there's clearly a lot of growth opportunities.

Speaker Change: The question is how would you prioritize these growth opportunities what are the key growth priorities in terms of categories and geographies that you see is there anything different here anything you're thinking of emphasizing more than comparables brands or geographies or vice versa.

Speaker Change: And the second second question, which is clearly connected to this given all these opportunities for driving top line growth, how you're thinking about.

Speaker Change: PRA investment going forward on the tradeoff between topline and margin I think for 'twenty. Five you said that you intend to go back to the historical 17% 17, 5% range do you see this also is the right range for the longer term.

Speaker Change: My third question is more on 2025, you're not of course, providing specific guidance, but youre, saying that the ongoing let's say muted topline trend given the environment. So it should continue.

Speaker Change: Told us about Q1 now when you think of the comps you face over the year and the various regions the market trends, what's going on in the market are you able to give some regional color sort of what regions. You expect you could see an improvement versus last year and we're on the country you feel the outlook is probably still too uncertain to call.

Speaker Change: Okay, great Yeah, some great questions and I will caveat all of these questions, which is I'm six weeks in.

Speaker Change: And as a result, I will be as clear as I can be at this stage, but I'm sure you understand I'm not going to be concrete in terms of the path at this stage as I get around the business.

Speaker Change: So taking your questions one by one and the first one is in terms of a confident outlook.

Speaker Change: Well the same thing in terms of coming into the business and seeing the current negativity within the industry and in the reporting that we've seen over the past couple of months.

Speaker Change: Against that backdrop, and then when you look at the company performance with a CEO change with the cobalt the integration with all the cyclical impacts that everyone's talking about and all the other challenges we've seen from a macro economic point of view and policy and geopolitical volatility.

Speaker Change: The business still managed to grow and delivered good growth across most of the brands in most of the markets. So against that backdrop. That's one of the reasons why I'm confident in terms of.

Speaker Change: The opportunity going forward is that the team shows what it's capable of doing in a very tough market and I do think as the markets continue to improve that puts us in a very good position.

To your second question around the opportunities Youre, absolutely right, we have still low penetration in many markets around the world. We also have less geographic spread and most of the companies I've worked in before we have a very small presence in Africa Middle East still Latam is very small and in southeast Asia just to give you. Those example.

Speaker Change: But clearly we can afford to to develop all of these at the same time. So in terms of the funding on the A&P I think we're going to be reviewing what we think we need to be pragmatic and have a planned growth over a number of years and work out how we're going to fund that against the existing route to market capabilities that we have.

Speaker Change: If I were to then look at what are the sources of funding more clearly some of the cost containment programs that you've already heard from Paolo about it will be one of the ways that we can do that but more specifically we are taking the time to review really the four areas around this topline revenue management and what we think we can do there.

Speaker Change: The second area is around opportunities in cost of goods and further building on the capex investments that have been made and driving greater efficiency out of it.

Speaker Change: Third is more efficient and effective deployment of A&P through the house of brands model.

Speaker Change: Really gives us that that that oversight globally for each of the brands and then finally, clearly ESG and efficiencies. So when I'll take those and look at the opportunities and work with the team which is the process of working through now we're in a position where we'll come out towards the summer with more information as to what our plan is the market share ambition, we have in different.

Speaker Change: Markets, how we want to fund it and then really the last part for me is is also leveraging what I think is a truly unique.

Speaker Change: Our competitive advantage, which is the camera is the culture and the quality of the team that we've got to work with so you put all those things together I think that's why I'm confident in terms of the direction and hopefully that explains the process that we're going to work through.

Speaker Change: Yes, any any color on 'twenty on 2025 regionally.

Speaker Change: What.

Moving parts.

Speaker Change: Yes, I think if we continue some of the trends on this I think we will see some fast growth in the Americas recognizing.

Speaker Change: Recognizing that the U S may be impacted by tariffs, but I think it's a it is a moving feast as you'll see on a daily basis at the moment. So we're going to have to see what happens there.

Speaker Change: Better contribution from Jamaica, after a tough year and hopefully we won't see a repeat of the impact of the hurricane.

Speaker Change: And as I said earlier, the other markets are growing well so actually in some of the.

Speaker Change: Outside of the top six markets Youre seeing some good growth in EMEA.

Speaker Change: We're seeing some good growth of APAC bouncing back and as I said earlier I think there's further opportunities to really take the portfolio into more markets its been quite selective around individual markets.

Speaker Change: Really pushing to all three brands and I think thats more of an opportunity to leverage our route to market.

Great. Thank you very much.

Speaker Change: The next question is from Edward Mundy of Jefferies.

Speaker Change: Evening, Simon in Palo Alto three questions as well please.

Speaker Change: Following the first one.

Speaker Change: You know this industry very well.

Speaker Change: Clearly an ongoing debate going on around current weakness to what extent that cyclical and structural I think you're pointing to the cyclicality is the biggest driver.

Speaker Change: <unk> 2025 is a year of transition I guess, what gives you confidence that the majority of the headwinds are cyclical.

Speaker Change: That's the first question.

Speaker Change: And the second question you sort of mentioned some very interesting in your opening remarks about bringing different optics to support and extract the full potential of this business I appreciate you're only six weeks in but sort of any very very early preliminary thoughts around that would be very interesting other by other house brand or geography.

Speaker Change: Third of all.

Speaker Change: You also mentioned sort of a healthy tension between house of brands in the regional market companies I guess, where you have seen this work effectively.

Speaker Change: Are there any sort of tangible things that can part could be doing that it is not currently doing and thats implemented effectively.

Speaker Change: Okay.

Yes. Thank you, yes, very good questions I mean, I think look in terms of the industry. There is a lot of speculation as to what is going on and my view at this stage is that people are taking quite disparate data points and Tony into a macro trend and then reacting quite negatively about the potential of what is a highly profitable and <unk>.

Speaker Change: <unk> industry.

Speaker Change: So it's the first point on this is that moderation moderation as Dana sorry for 60 years. This is not a new story.

Speaker Change: And as a result in terms of.

Speaker Change: Highlighting changing consumer trends I think that is part and parcel of actually working in this industry I've been in it for 30 years. We've seen these challenges come before we've heard cognac is that we've heard about code satisfied Raman is coming again and ultimately on that so it's probably more I am confident in terms of the cyclical nature of some of this feedback.

Speaker Change: Do you think at the moment, we are in a unique situation within certainly from my experience.

Speaker Change: And that is the fact that for the first time every market around the world is down at the same time as you know cutoffs and there'll be a market down three markets down, but there'll be markets to offset this is the first time, we've had a China or Russia U S and Latam all of the markets down at the same time and as a result, there are less opportunities to mitigate.

Speaker Change: Downward trends in some of the markets. So from a macro point of view I do think the current economic environment is really doing two things one is its limiting company's abilities to mitigate challenging markets and the second thing is I think consumers are really looking at how they're spending their money and I think you see that as a continued trend as a result, we've been here before.

Speaker Change: And I do think consumer behavior will come back I think it will be a bit different I think we are seeing an evolution on some of the occasions.

Speaker Change: But ultimately on this I think we're extremely well positioned to target those occasions.

Speaker Change: With a portfolio that is both aspirational and affordable at the same time.

Speaker Change: So to that point of view I do I'm positive it is cyclical and not structural.

Speaker Change: I think the second thing in terms of different optics on it.

Speaker Change: Again every company is a little different on the culture is different and the way to look at opportunities.

Speaker Change: At this stage I'll, just give you a point of view that hopefully I'll be able to build on and a few more months went up a little bit more time with the team. So the first one is that <unk> has been incredibly successful for many many years as a result, some of the <unk>.

Speaker Change: Joyce's have been less.

Speaker Change: Less difficult to make a guess because the business just kept delivering and kept delivering if I compare to other companies have worked and I think we've had to be more selective around the choices that we've made and I think thats one of the areas that I can definitely bring a different perspective on.

The second area would be around the continued success of the M&A agenda I think we've got some amazing brands, but I do think that they've got further legs that we can run with what we've got and at the moment. If you look at the brands. We've acquired really they've got areas of strength in three or four markets as opposed to 10 or 15, and Thats, where we can leverage the investments.

Speaker Change: So we've made in our route to market capabilities and in our supply chain to be more effective going forward.

Speaker Change: And that leads into the house of brands structure, which ultimately is designed to do exactly that it creates a single minded focus and I've seen both a central marketing team and our house of brands model in various iterations of both of them before the benefit of the house model is <unk> got a team of people that wake up every morning, and all they think about all day.

Speaker Change: Everyday as Cabos yet.

Speaker Change: And that is different than what it is in our growth and our global marketing structure.

Speaker Change: And because they are managing the brand holistically with operations supply chain innovation and also working with the market directly it creates a really healthy tension about making sure that all the brands are getting the right focus in the right markets to deliver corporate growth that we believe these brands can deliver.

Speaker Change: And that's really what I would say operating quite differently and I think it will be a change for <unk>, but a very positive change that fits really well with the camera is the culture quite entrepreneurial really get all my that makes things happen.

Speaker Change: So hopefully that answers your questions.

Simon Hunt: Thanks Alan.

Simon Hunt: The next question comes from Chris pitcher of Roper in Atlanta.

Chris Pitcher: Thanks very much.

Speaker Change: A couple of quick questions for me Simon first of all when you mentioned you were holding off on acquisitions in the near term and it's more of a focus on divestments.

Chris Pitcher: And I appreciate you've only been there.

Speaker Change: A couple of months, but in terms of the longer term strategy ambition for the portfolio I mean, the heart of Campari was very much its position in a parity, but over the last years capital has been deployed into aged spirits such as cobalt.

Speaker Change: And maybe you could comment a bit about the Cape Cod spirits minority site, which looks to pay per cost, let's move into Scott is the sort of the longer term view.

Speaker Change: Almost spilled out into that deploy capital into an area, that's very different to the old Campari story.

Speaker Change: And then maybe in addition to that maybe.

Speaker Change: And maybe one more question about <unk>.

Speaker Change: The Capex program continues into this year Youre expanding Bourbon.

Tequila capacity, but once you've expanded expanding that capacity given everything that's going on in the industry and the potential supply imbalance are you.

Speaker Change: You're going to ramp those up straight away or should we expect a more modest outlook for.

Speaker Change: Maturing spirit's investment and maybe and I'm, sorry for causing I imagine that could well be a source of cash given you've got just short $400 million of stock on the balance sheet, which looks to be a bit modest compared to what youre selling.

Speaker Change: Okay, Chris Yeah look a couple of things in terms of the pause on M&A is generally that I feel that we have an incredible portfolio to work with already.

Speaker Change: Our existing portfolio has got legs beyond kind of where we are today. So I think that's the first thing.

Speaker Change: Second part is definitely in terms of opportunities to divest.

Speaker Change: The.

Speaker Change: The reason for clients Somebody's brands has changed as the business has grown and we're.

Speaker Change: Now in a position that the strategic role that they were playing is probably less strategic than it was 510 or even 15 years ago. So we will have a look at divesting, but in the current environment, It's making sure we can achieve the right value for those brands.

Speaker Change: I think longer term, we'll continue to have a look at opportunities in M&A, but for now we need to focus on deleveraging.

Speaker Change: To focus on getting the existing assets working as hard as they possibly can and I think in terms of more of a portfolio strategy, which is a lot of the work we're doing at the moment I think there are probably three areas.

Speaker Change: Yes.

Speaker Change: Better explain our thinking going forward and again, hopefully we'll have more of this.

Speaker Change: As we come back towards the summer.

Speaker Change: The first is we have a unique global leadership position in our priorities.

Speaker Change: And as a result that gives us access to the on premise more so than any category I think I've worked and.

Speaker Change: As a result that is a door opener for the rest of the portfolio not only in terms of the strength that it has in the on premise already and I think a lot more that we can do with it and secondly in terms of then leveraging a relevant portfolio.

Speaker Change: Which is a combination of both aged and non aged brands and Thats, where the rest of the portfolio comes in.

Speaker Change: The third part of the portfolio is leveraging on monarch.

Speaker Change: We have a fantastic brand and Kadena.

Speaker Change: Now because the new category for most companies for us it would skew.

Speaker Change: Originally created 1965. So this is something that's been around for a long time as a non alcoholic spreads and we see some really good opportunities to leverage that going forward.

Speaker Change: So I think in terms of answering your questions hopefully that gives you a bit of a flavor of the portfolio that we're looking at going forward in terms of the investment in <unk>.

Speaker Change: And the door and I think we'll see how things progress there, but very very early stages.

Speaker Change: In terms of the Capex I'll pass this over to Paul on just a second but I'll just topline view as the investment is going in is fantastic. It's fantastic because it's now built the capacity that we need in a lot of the capabilities that we're going to need for the growth that we think will happen over the next five to 10 years.

Speaker Change: And as a result, I know, it's a hefty investment, but puts us in a very good shape, but although if you want to cover off some of those yet.

Speaker Change: The investments the five to 600 million Euro extraordinary Capex plan aimed.

Speaker Change: Aimed at basically tripling.

Speaker Change: The filling capacity.

Speaker Change: And as for four <unk>.

Speaker Change: Malone brand as well as the tripling of the bottling capacity in that plant than there are in the plan, we had the doubling of the seating capacity of wild Turkey.

Speaker Change: Andy and the doubling of the bottling capacity for about a blended portfolio. So for a number of years I think in our filing with the investments that we've made that as you know Simon just said and looking at the future beyond that we're also thinking at the possibility of our sourcing some of our bottling activities.

Speaker Change: Also to diversify.

Speaker Change: The <unk> for our business continuity.

Speaker Change: Perspective on an aging liquid clearly following the acquisition of what was there in the first time consolidation of the brand.

Speaker Change: <unk> million euros of ageing liquids, we're sitting over $1 billion 2 billion euro of.

Speaker Change: AG liquid which is.

Speaker Change: What we need.

Speaker Change: Taking into consideration that both on.

Speaker Change: Was there an hour burnt bonds, whereas ramps and Glen Grant, which is generally important brand at wassa to build our presence in Asia as well, we think we're fine with the liquid that we have we don't have sand. So we need to lay down more and beyond what we dumped a year after year better than the other and we're not considering that.

Speaker Change: The ability of divesting the liquid that we have because that would compromise our ability to develop those brands in the future.

Speaker Change: Thank you very clear.

Speaker Change: The next question is from Sandeep <unk> of UBS.

Speaker Change: Good evening Simon Paller at three for me as well. Please firstly can you talk to where a wholesaler and retailer inventory levels, particularly in the U S.

Speaker Change: And what your outlook is for shipments in 2025.

Speaker Change: Secondly, we've seen a bit of a slowdown in ASP alone.

Speaker Change: Appreciate them some destocking in Q4, but some of the sell out data is often through Q4 and the start of the year. So love to get your take on what you think's happening.

Within the category.

Speaker Change: Positioning.

Speaker Change: And thirdly can you just talk a little bit about the pricing outlook for 2010 and volume and gross margins.

Speaker Change: In more detail I think public Q3, you spoke to 19 basis points.

Speaker Change: A tailwind.

Speaker Change: From several moving parts.

Speaker Change: I appreciate the update on that as well please thank you.

Speaker Change: Okay. Thanks, Sanjay if I may in.

Speaker Change: In terms of the wholesaler days at this stage I think.

Speaker Change: The team finished out the year with pretty balanced across them. A few brands were down a few brands are up but generally in pretty good shape in terms of doing it.

Operator: Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. Today's call will be hosted by Mr. Simon Hunt, Chief Executive Officer, and Mr. Paolo Marchesini, Chief Financial and Operating Officer. I will now hand you over to Mr. Marchesini. Please go ahead, sir.

Sorry, I have not starting with heavy inventory at the wholesale level I think it really depends a little bit and answer your question, both the wholesale and retail and what happens with tariffs.

Speaker Change: Had the news as of yesterday, it depends what those tariffs extend into into other regions and does that put forward pressure on shipments to actually try to move things in.

Speaker Change: As I said in my comments, yes.

Speaker Change: Tried to maximize as best we can on short notice inventory positions.

Paolo Marchesini: Good evening, good afternoon to everybody. I am pleased to be here again with all of you to review our 2024 results, and give you our initial perspectives for fiscal year 2025. More than that, I'm happy to be joined here by Simon, whom I'll leave the floor to in a few seconds. I wanted to highlight that we have intentionally tried to keep this presentation as short as possible to leave ample room for questions. Of course, and as always, Kiara and the whole IR team, they are happy to connect after our call to further deep dive with all of you in the upcoming days if needed. Simon, floor is yours.

Speaker Change: The brands that might be affected but ultimately I think that's going to be a bigger driver of what's the shipment patterns all of them.

Speaker Change: And really the depletion trends at this stage.

Speaker Change: I think in terms of ASP, along again, you see everyday there is basis since the beginning of the year, that's been there or tariffs or no tariffs or tariffs or no tariffs and as a result, I think that is creating some nervousness around the category generally.

Speaker Change: But again, we've also got to be balanced that Epsilon performance in the on premise continues to be extremely good. So while we see some softness in the off premise, we're still seeing very encouraging trends in the on premise and as we look to really kind of sharpen our execution efficiency and saying how can we accelerate on the on premise strength, we have recognized it.

Simon Hunt: Fantastic. Thanks, Paolo. I'm very happy to be here with you today. As I'm sure you all know, this is my second month in this role, and it's been a busy but exciting period. I've had the chance to meet with many of our colleagues around the world already and deepen my understanding of Campari's business. Campari has impressive competitive advantages, including its culture and people, shareholder structure, and enviable brands. I believe I can bring in different optics to support in extracting its full potential. I'm very much looking forward to meeting many of you in the next weeks or months in person and sharing more regarding our roadmap ahead towards the summer, where we'll be in a position to give you deeper perspectives. Now, a short summary of how we see the environment and our positioning.

Speaker Change: Off premise is going to be a bit crowded through.

Speaker Change: Through the balance of the year.

Speaker Change: In terms of the pricing and margins are also have to pile up so.

Speaker Change: On manager So we clearly stated our objective of achieving.

Speaker Change: <unk>.

Speaker Change: Flat EBIT margin on a full year basis.

Speaker Change: Excluding as we've clearly stated the impact of <unk>.

Speaker Change: Any tariff increase that.

Speaker Change: At the moment based of the most recent news is is.

Speaker Change: Costing us 35 million euros in.

Speaker Change: 2025 for the Mexico imports, which is roughly <unk>.

Speaker Change: 10 basis point dilution on our EBIT margin before any mitigation before any mitigation because clearly we will develop plants.

Simon Hunt: As all of you know, 2024 was a tough year, marked by significant macroeconomic and geopolitical volatility, some of which remains today. This created pressure on our sector across all regions in different forms, leading to an impact on consumption patterns as well as significant destocking across the trade. On top of this, we were faced with very poor weather conditions, especially in Europe, a tough mix of events to manage. All of this created a challenging backdrop and low visibility during the year. Despite this, we delivered positive results with +2.4% organic top line and +5.2% total growth with ongoing outperformance versus the sector.

Speaker Change: Now if you look at the key drivers of.

Speaker Change: Flat EBIT margin on a like for like basis, excluding tariffs.

Speaker Change: Clearly we have confirmed the intend to deliver the 50 basis point SG&A as a percentage of revenues containment that's a ticker.

Speaker Change: Directionally, we intend to step up our A&P investment also in year 2020, starting from the authentic quantify so most likely A&P as a percentage of revenues will come in at between 17% and $17 five.

Speaker Change: Of.

Speaker Change: NASA of net sales.

Speaker Change: Davita gross margin, which is the point that you just made.

Clearly in the back end of the year, we've alluded to potential net sales.

Speaker Change: Tailwind of 30 million euros coming from different that you are now.

Simon Hunt: I understand the expectations for 2024 at the beginning of last year were higher, but looking back at everything that happened, this is, in my opinion, a solid result and really shows the resilience of our teams, our brands, and our capabilities. During the year, we executed the planned investments to further strengthen our front line, our systems, and our supply chain capabilities, which clearly had an impact on profitability, given the more muted than expected top line growth. At the same time, this period gave us the impetus to look internally, to evolve how we work and focus on increasing efficiency and reinforcing our focus on our priority brands for the future.

Speaker Change: Tailwind and headwind would not.

Speaker Change: Go back to that.

Speaker Change: As I have flagged before some of those 30 million euros, namely 10 million euros have been already pooled.

Speaker Change: We're already into Q4 of 2024, so it's already in the base. If you will now if you look at iron ore pricing clearly pricing is extremely low.

Speaker Change: Juno.

Speaker Change: The problem in environment is extremely dense, particularly in I would say in.

Speaker Change: In Europe.

Speaker Change: And somehow.

In the U S as well clearly our strength in.

Speaker Change: Entre space.

Speaker Change: As an offset to the <unk>.

Speaker Change: Due to the pressure that we're seeing in <unk>.

Simon Hunt: The solid performance in Q4, both in terms of top line at +3.4% as well as gross margin of 40 basis points, was driven by better trends in Europe and Aperitifs following a weak peak season, which also is supported by the positive impact of COGS, especially due to the agave costs. Current low visibility on how long these cyclical headwinds will last means we view 2025 as a transition year. This means ongoing softened top line growth while we continue our full focus on efficiency and execution. We are doing this without compromising our growth investments, both in terms of the commercial teams as well as brand building, while focusing on operating deleverage and effectively managing our balance sheet. To summarize, this has been a challenging and will continue to be a challenging year in 2025.

Speaker Change: On the other end.

Speaker Change: At the past.

Speaker Change: Precedence.

Speaker Change: Whenever we had a commercial dispute.

Speaker Change: <unk>.

Speaker Change: Proved to be extremely resilient we've accepted.

Speaker Change: The the fact that the delisting and eventually we came back with a with stronger pricing. So there is an element of risk in pricing that we have to put into the equation and then most importantly, I think.

Speaker Change: The sales mix will play a big role here in Q2 and Q3.

Speaker Change: So jury is out we still believe that.

Speaker Change: Our pedigree, our aperitif portfolio as traction so that will help us.

Speaker Change: Offset all the pressure that we have but they are actually at the beginning of the.

Speaker Change: We would rather see gross margin as a percentage of revenues are fairly flattish now.

Speaker Change: Now if you look at the phasing, which I believe is you're at a point or so.

Simon Hunt: We operate in a highly profitable and attractive sector, and our unique positioning makes us very confident for the future. We'll execute strategic actions to deliver long-term sustainable market outperformance with our existing unique brand portfolio. This means digesting our acquisitions, growing the brands we have, and easing off M&A for now. We're gonna remain focused on what we can control, like efficiencies, cost control, execution, and take actions to mitigate impacts for what is beyond our control, like tariffs, which we'll comment more on later. Before deep diving into 2024, we want to start by giving you a bigger picture. We've been able to record strong top-line growth for the last 20 years through evolving market conditions, and this has been achieved via a focused approach, leveraging a strong brand portfolio.

Speaker Change: Yes.

Speaker Change: Got it from the top line as the time goes by quarter after quarter, we sense that we will have.

Speaker Change: More.

More and more traction Q1 is.

Speaker Change: The softer top line quarter due to noise there is phasing.

Speaker Change: So thats a factor so with the gross profit as a percentage of revenues.

Speaker Change: Specced in improvement.

Speaker Change: In Q2 Q3 in peak.

Speaker Change: Peak quarterly peak quarter for for their Barry Davis, the A&P phasing is somehow frontloaded, So Q1 and potentially also Q2 would.

Speaker Change: It would be negatively impacted by that but we will implement dates and gate approach. So we will not overspend beyond.

Speaker Change: If we're not.

Speaker Change: Alright actively confident that there is there is traction and visa.

Simon Hunt: Just to highlight here that of course, Aperitifs is a critical part of that story, and it will continue to be. In the meantime, we have diversified and strengthened our portfolio. For example, the story of Espolòn starting with almost nothing and now being a significant contributor to the group's performance and an accelerator of growth. Certainly these last five years have been disruptive for the sector, but at the same time, on aggregate, it allowed us to reach bigger scale than our normal run rate pre-COVID rate would have. Our top line reached EUR 3.1 billion. For us, it's level 20 years ago. Our pre-COVID run rate of +5% would have meant EUR 2.5 billion. That's an additional EUR 600 million we have added to our scale in this period.

Speaker Change: The cost containment program.

Speaker Change: It is to deliver the 50 basis point clearly given the fact that in many markets.

Speaker Change: That initiative is.

Speaker Change: Basically.

Speaker Change: Going through.

Speaker Change: The consultation with the Union. So the phasing is very much into the backend of the year of the savings. So we will have in essence adverse.

Speaker Change: Impact on the three things.

Speaker Change: Negative phasing more than the adverse negative phasing across quarters on gross profit A&P and SG&A with.

Speaker Change: Gross profit.

Speaker Change: Peru being overtime A&P.

Speaker Change: <unk> got at the beginning of the year and later at the end of the year in SG&A.

Speaker Change: Key.

Speaker Change: Benefits that would be in inaccuracy in Q4.

Simon Hunt: Following a transition period in 2025, we believe our growth story and potential to gain market share is solid for the medium term. We still have low penetration across many geographies. We have an enviable brand portfolio that is aligned with where consumer trends are moving, combining power icons in aperitifs and distinctive brands in high potential categories, like Espolòn. With the investments we've made to enlarge our route to market footprint and build capabilities with our new House of Brands model, we are now positioned well to benefit from the evolution of consumer trends in our sector in the upcoming period. Now let's have a look at 2024 trends in more detail. Overall, we record a resilient performance with 2.4% organic and 5.2% total growth. The latter mainly due to the additional contribution of Courvoisier with limited FX impact.

Speaker Change: Many thanks.

Speaker Change: The next question comes from Simon Hales of Citi.

Good evening welcome Simon Hi, Paolo.

Speaker Change: I've got a couple of questions. Please maybe firstly.

Speaker Change: Follow up on.

Speaker Change: Some of your remarks, there in relation to the gross margin just so I have this clear I think you said.

Speaker Change: $10 million of the $30 million benefit that you thought was going to fall to 2020, followed was pulled forward into Q4, what is a golf related because I think also back at the Q3 stage you were talking about potentially on top of the $30 million.

Speaker Change: The sort of benefits to talk coming from sort of class logistics and things.

Speaker Change: So I'm just still trying to square that circle, it looks pretty conservative your flat margin guidance, particularly as we get into the second half of the year you lap through the Destocking, we've seen on things like Campari in Q3, and also the disruption of Jamaica. So.

Speaker Change: So am I missing anything.

Simon Hunt: In terms of regions, we've seen resilient growth in both of our main regions, the Americas and EMEA. Moving to the brands, first to state, you'll see a different composition of brands here than in the past and for the rest of the document, as we've now transitioned to the previously announced House of Brands structure. The main growth drivers have been the Houses of Aperitifs and Agave, with +6% and +10% growth respectively, as well as the House of Cognac and Champagne with +2%. Of course, excluding Courvoisier since it's in perimeter until May this year. In terms of sell out versus sell in, we have recorded balanced trends across our major regions with solid ongoing performance driven by our key accelerator brands, including the Aperitifs and Espolòn. In the US, we outperformed across all channels in sell out.

Speaker Change: And then secondly, just on <unk> can.

Speaker Change: Can I just ask did kubota contribute positively in aggregate group EBIT in fiscal 2024, and as we look to switch 25 are you happy with stock levels in trade for CA.

Speaker Change: In your core markets and just your overall guidance for 2025 as it stands right any tariffs.

Speaker Change: But <unk> will be positive in 2025 as well.

Speaker Change: Yes on the first one on gross margin is.

Speaker Change: The $10 million.

Speaker Change: <unk> for the.

Speaker Change: Coming from multiple.

Speaker Change: <unk> there is a little bit of.

Speaker Change: AGA there as you correctly pointed out.

Speaker Change: We've had some positive discussion with.

Speaker Change: The glass suppliers.

Speaker Change: Of course, we are.

Simon Hunt: +2% outperformance in off-premise, +4 percentage points in NABCA, and +6 points in strategic on-premise in the world's most profitable market. We did this while maintaining pricing discipline despite the market pressures. In EMEA, Germany has been the strongest market, while Italy and France had a challenging peak season due to the poor weather. UK was positive on sell out despite the impact of the Jamaican rum supply shortages, mainly driven by the aperitifs. Focusing on the Americas. Of the total organic growth of +4%, the US was stable, impacted by the subdued market context. In particular, Q4 had a tough comp with a base of +13% last year, leading to a negative Q4 on a year-on-year basis. While Aperol and Espolòn saw solid growth, +12% and +11% respectively.

Speaker Change: It is a bit of drift on additional DNA for next year due to the extraordinary.

Speaker Change: Capex program and our logistic cost.

Speaker Change: We we have some some increasing in so we have.

Speaker Change: Sorry, we've managed to to repatriate some of the savings earlier than expected. So overall basically were.

Speaker Change: Where we're expecting to land on on tailwind, where we wanted to be.

Speaker Change: If you take 24 and 'twenty five.

Speaker Change: As a whole so.

Speaker Change: It's not just 111 element.

Speaker Change: Yeah.

Speaker Change: On crude was there I think.

Speaker Change: Sam let everyone yes.

Speaker Change: Secondly in terms of the day assignment at the moment from what we've seen a few markets where post acquisition I think the team has now been cleaning up the days are a bit heavier in some of the markets in Asia.

The team has been working through but in terms of core markets of the U S and UK no real concerns in terms of in terms of days of stock.

Simon Hunt: Overall growth was brought down by pressure on SKYY and some softness in Wild Turkey. In Jamaica, Q4 saw a return to growth after the impact of the hurricane on production and also on local consumption in Q2 and Q3. The +1% annual growth we recorded would have been mid-teens without this impact. Production is now back to normal as of February, and our environmental investment, the Dundee Water Treatment Facility, will be finished in Q2 and will make us more resilient to future potential climatic shocks. The rest of the Americas continued its solid performance in Q4 and closed the year with +14%, mainly driven by the Brazilian brands Campari and Aperol. This clearly shows the potential of our brands is truly widespread across the Americas. Now moving on to EMEA.

Speaker Change: I think we will have to again say what happens if we suddenly start saying tariffs come in then again same comment would come back that we would see what we could accelerate to try and mitigate some of that but we'll have to wait and see.

Got it and what could well see a positive Q2 EBIT in 2024 and would you expect it to be contribute positively into in 'twenty. Five was interest and we are going to mean that it's probably more subdued.

Speaker Change: Yeah, it will be positive, but the improvement will be clearly limited because as you know the very first full year, we manage the brand. So we step up A&P spend.

Speaker Change: And of course in all the time you are not the objective is to improve the.

Speaker Change: What was the gross margin as a percentage of revenues.

Speaker Change: And 35% gross margin as a percentage of revenues.

Speaker Change: Do you at all.

Speaker Change: Clearly that can answer this factory gross margin as a percentage of revenues is coming from.

Simon Hunt: We recorded +3% organic growth for the year, with a catch-up in Q4 following a challenging peak season. All countries were positive in Q4, except for the UK, which was flat. Focusing in on Italy. We've already explained the 3 key reasons for the performance in 2024, but just to recap, we have a commercial dispute in Q3, around EUR 10 million impact. We had destocking in the trade due to subdued consumption patterns and the cost of capital. Finally, we had poor weather conditions in the peak season, as you know. As we stand today, the first is resolved. Stock in the trade is at healthy levels, although there are still some macroeconomic pressures. As for the weather, we'll see how the season develops this year. In any case, the brand health and strength of our portfolio remains strong.

Speaker Change: A number of reasons that is under absorption of fixed production costs at <unk> plant.

Speaker Change: Given the reduced volumes.

Speaker Change: The cost of the <unk> the <unk>.

Is that what currently that being is quite <unk> in terms of pricing, we see in the future potential for further closing that gap versus.

Speaker Change: Regarding the marketing kind of incumbent in the U S market outside of the U S. The brand is doing nicely in the UK and Europe.

Speaker Change: Clearly Asia is a very very small so would that move the needle.

Speaker Change: But I think it's a combination of a reduction of.

Speaker Change: Of course, Sir.

Speaker Change: In value.

Speaker Change: And as a percentage of revenues an improvement of the net sales.

Simon Hunt: One other important point is that the other countries in Europe, which contribute 15% of our overall sales, continue to grow strongly with +12% organic growth in 2024. The biggest drivers are GTR and Greece, but also other countries like Spain and the Netherlands, further reinforcing the market expansion opportunities for our portfolio across EMEA. Okay, I'm moving on to Asia Pacific. 2024 was marked by both external challenges, like the challenging operating environment in Australia and China, as well as negative impact of some of our own actions, like the route to market changes we've implemented.

Speaker Change: Leader the price.

Speaker Change: Okay.

Speaker Change: Thank you very much guys.

Speaker Change: The next question is from Trevor Stirling of Bernstein.

Speaker Change: Is it permanent Paolo.

Speaker Change: Let me just reiterate Simon's say welcome to the delights at the sell side Q&A Simon.

Chris Pitcher: Two questions from my side. So one if you look at the six months six or six weeks, so far they feel like six months. The first six weeks and compared to all your due diligence what surprised you about campari now youre actually in the powers of the organization if you like.

Chris Pitcher: And second question are you a little bit for you a little bit for Paolo.

Simon Hunt: Overall, we recorded -6% organic growth in our smallest region, but with Q4 returning to growth with +4%. Australia in particular was impacted also by our decision to decrease co-packing activities, excluding which our full year performance would have been flat, with growth driven by the aperitifs, offsetting some of the pressure on the Wild Turkey RTD that we've seen from White Spirit RTDs. To benefit from this trend, we've launched our own Espolòn RTD, which is small but growing nicely off a small base. In the rest of Asia Pacific, China and India are contributing positively in Q4 following route-to-market changes which weighed on performance previously. Brown spirits, including both bottle and RTD formats, performing well across Japan, China, off a small base.

Chris Pitcher: We delivered three 5% organic top line growth last year and 2025, you should have some easy comps from Destocking in the U S and Italy.

Chris Pitcher: Got these easy comps on the hurricane in the UK in Jamaica.

Chris Pitcher: <unk> share of the European whether we'll go but that does look like we should be thinking at something north of two and a half in 2025 I. Appreciate there's a lot of uncertainties out there in this transition year and all the caveats, but directionally 2025 should be a better year than 2024.

Trevor: Yes, Trevor Thank you for your warm welcome it's always good to be put in the spot and ask this question. So.

Speaker Change: Looks on six weeks it was different from from what I thought.

Speaker Change: I think I'd, probably keep it pretty simple around three things.

Speaker Change: One is the culture.

Speaker Change: The camera is the culture and the passion that the countries to team have for the business for the brand is.

Simon Hunt: As I previously mentioned, we've transitioned to the House of Brands structure as of 2025, and this is a structure that I believe is very conducive to more focused and structured growth among our categories, while also creating efficiencies. This way, the MDs of the houses will champion their brands while the regions will champion their markets, creating a healthy tension between the two and also allowing us to better leverage geographic expansion opportunities while optimizing brand building investments. First, looking at the House of Aperitifs, we had a solid performance in Q4, which pulled the full year organic growth to a solid +6%, helping to offset some of the impact of the weather-challenged peak season. Aperol had double-digit growth in Q4, driven especially by the US, Germany, and Italy, its top three markets, indicating that its brand health is strong and healthy.

Speaker Change: One of the strongest cultures I've seen and as a result, I think it's a real competitive advantage that I look forward to seeing how we can really develop that going forward even further.

Speaker Change: I think the second part as well as getting to know the team I'm very lucky to have some incredibly experienced people like Paolo who have been with the business for a long time, you all know him very well he knows the business backwards I can ask a little bit silly questions about what I think can be very open and we get on very well.

Speaker Change: Been a good kind of opportunity for us to work together as a team, but then more broadly beyond that as well just the quality of the team that's a very good team.

Speaker Change: And it gives me a lot of confidence in terms of the ambition going forward.

Speaker Change: The third thing for me is the opportunity I came here because I believed in the brands I believed in the family ownership and I believed in the potential and again everyday im here Im feeling more positive about that decision put it that way.

There is a lot that we can do with what we've got and very excited about the opportunities going forward.

Simon Hunt: We'll dive more into this in the next page. Campari closed the year with +9% growth, driven by the Americas, as well as some of the priority markets in EMEA. This showed that the Negroni trend and the progressively increasing Campari Spritz trend is continuing. Crodino, our non-alc, continues to grow off a small base, but we'll focus more here in the future. The rest of our aperitifs are also growing nicely, supporting our leadership position in the aperitif category globally. Now, to give you a more holistic perspective on the positioning of Aperol and the potential for growth going forward, we included on this page a few additional details. In the first chart, you can see the increasing diversification of Aperol over the last 10 years.

Paolo: So hopefully that gives you might kind of perspective on a six week basis, just in terms of I'll hand over to Paolo in terms of the specific on the numbers, but I think it's a fair question around.

Paolo: All the numbers being cautious at this stage there is so much volatility if I am totally honest if we sat here for an outlook and told you is going to be significantly greater than that I think we would not be acting, particularly responsibly given the volatility in the marketplace and as a result, I think we will continue to go after every opportunity we can but also need to be.

Paolo: Pragmatic about what we can control.

Paolo: Sure.

Paolo: Yes, I think given our driver.

Paolo: The $2, 5% top line.

Paolo: Growth that we delivered last year and most importantly that two 9% contribution after A&P deliveries is quite robust given the perfect storm we've gone through last year. So if you look into 2025 of course that bodes well for four positive.

Simon Hunt: From being largely Italy heavy, the competition has become more balanced over the years, with the US and new geographies becoming more important. However, the top six markets still contribute 70% of the total. While we believe there's still a significant opportunity to grow in those six markets, we are also just starting to leverage the route to market capabilities around the world in new markets. On the next chart, you can see that we still have a significant opportunity to drive awareness and trial, especially in the US, the biggest market, where even in parts of the country where we've been activating for longer, the awareness of the brand is still very low. One in two US consumers have never heard of Aperol, which is a massive opportunity for us. Another important indicator is per capita consumption, especially compared to our most mature market, Italy.

Paolo: Delivery on the other end in Q3 of last year, we burned our hands on it.

Paolo: It is appointing a quarter. So we do not want to blend up into very same situation and I think there are opportunities, but there are also risks.

Paolo: That we have put into the equation.

Paolo: A player like comparative who is an extremely disciplined in managing price.

Paolo: <unk> and in putting focus on the on the on trade in volume.

Paolo: Cutting the.

Paolo: Corners by aggressively pushing brands in India, Australia, clearly the risk of commercial.

Paolo: Negotiation is probably higher than than in other cases.

Simon Hunt: Since 2019, there is a solid evolution and improvement in per capita consumption across the largest six markets, but the levels are still low. Again, focusing in on the US, you can see that overall it's very low. Also in the 10 strategic states where we've been focusing, the per capita consumption is still below 10%. 10% of the per capita consumption of Italy. Just to put it in context, if the US was to get from the 4% that it is today to 20% of Italy's Aperol per capita consumption, the additional volume generated would mean net sales of Aperol globally would be between 45% to 50% higher just on achieving this in the US alone, let alone all the opportunities we have in other markets around the world.

Paolo: As you know last year, we basically lost.

Paolo: 25 million euros of revenues due to a commercial dispute.

Paolo: So these things happen and and.

Paolo: And so I think.

Paolo: We need to we need to recognize that this is why at this stage, we're not giving.

Paolo: The guidance on top line, but overall we.

Paolo: Fifth positive vis vis 2025 top line delivery.

Speaker Change: Thank you Simon and Paolo.

Paolo: Alright.

Paolo: The next question is from Alessandro Tortora of Mediobanca.

Paolo: Yes, I would.

Speaker Change: Anybody ever let's say to two questions.

Paolo: The first one.

Speaker Change: It's a follow up on your comment on gauging equally.

Paolo: Considering let's say deal without a four months from <unk>.

Simon Hunt: With that said, of course, in the challenging 2024 period, Aperol also got impacted to a certain extent. The brand health is in place. The profit pool is huge, including not only spirits, but also wine, beer, and RTDs. It hits perfectly in the consumption occasions, which are becoming more and more important in line with consumption trends. When you look at the potential coming out from market diversification, awareness, penetration, and the digital presence of the brand, the medium and long-term opportunity to replicate the success we've had in Italy across other markets is crystal clear. In terms of our performance in whiskey, there was the impact of the challenging category trends and competition in 2024. Wild Turkey has been especially impacted in its core market, Australia. However, there have been some positive trends in other markets and in Russell's Reserve.

Speaker Change: Working capital.

Speaker Change: Which kind of thoughtful we forecast, let's say going forward. So basically do you see a fundamental validation of visa.

Speaker Change: All of these ratios that's the first question. Thanks.

Speaker Change: Okay I'll take it more from a brand strategy point of view at this stage, which is the whole house of brands model has been in place for I think about five weeks.

Speaker Change: As a result, we want to give the team some time to actually step back and look at the portfolio of the impact on the aging.

Speaker Change: At this stage I think it's fair to say that when you look at the brand portfolios. We under index on higher marks on most of the aging liquid as a result, whether or not we've got the right profile now or whether it seems need to develop that over a period of time will influence some of that decision.

Speaker Change: How much of the answer to your question.

Speaker Change: Yes, there is.

Speaker Change: There is probably.

Simon Hunt: For the Jamaican rums, the main impact has been supply constraints and the impact of the hurricane on local consumption in Jamaica. Now that is resolved, we expect more stabilized trends going forward, and the underlying brand health of the portfolio remains strong in its core Jamaican market. In the House of Agave, clearly our focus is on Espolòn, which grew +14% this year despite the impact of normalization of wholesaler inventories in Q4. Let's move on to the next page to deep dive into Espolòn a bit further. Now, Espolòn has been a meaningful success story in the rapidly growing and crowded tequila category. Growing from almost nothing 10 years ago and gaining 12 points of rank to become the number 7 largest tequila with significant outperformance of the category in the US, its core market.

Speaker Change: You are alluding to the to the <unk>.

Speaker Change: One off reduction in finished goods that we have achieved last year, whether this is <unk>.

Speaker Change: Our recurring in coming years note. So basically the target is to keep.

Speaker Change: Our operating working capital as a percentage of revenues flat.

Speaker Change: Coming years.

Speaker Change: Of course, we.

Speaker Change: We'll do our best to tool to improve it but this is directionally the guidance in terms of.

Speaker Change: Data for coverage for finished goods I think.

Speaker Change: We're at a level, which is in our part of the sustainable of course, you can go over and beyond that but that would compromise that service level. So we will not push that envelope that thought.

Speaker Change: So that's the newer models so basically the operating working capital will follow the topline increase in 'twenty five and in coming years.

Simon Hunt: It is uniquely positioned at the right price point and right quality profile. The brand power also remains strong as it's perceived as cool and innovative. At the same time, it's got about a 4% volume market share, so it's still relatively small compared to the larger brands in the category, signifying potential room for further growth. You can also see from this page that the share of other markets in total is still very limited at about 9% of total Espolòn sales. They're starting to grow very fast in the recent period with increased attention on tequila in other markets such as UK, Canada, and Australia, as well as European markets like Italy.

Okay. Okay. Thanks, and then the second question is a.

Kevin: Kevin Thanks for the or lets say an indication on how the feedback and so on.

Speaker Change: Elaborate a little bit more on the hour.

Speaker Change: The effects are.

Speaker Change: Going to the US dollar, but also to the Mexican peso.

Speaker Change: We play for you medically if I have to look closer to Mexico, basically recent depreciation of Mexico basically irrelevant.

Speaker Change: Oliver <unk> or considering the indications thanks.

Speaker Change: Yes.

Speaker Change: The way you are now.

Speaker Change: It works is data.

Simon Hunt: For example, recently there's more and more focus on tequila and the Paloma in Italian articles, which fits very well with a refreshing highball alternative in the growing consumption occasions. We're gonna be focusing on being one of the front runners to lead this trend internationally. Lastly, on the varying composition, the increasing relevance of the brand is also evident from the increasing share of the more premium and higher margin SKUs like Reposado and Añejo in total, up from 30% in 2019 to 41% today. For Grand Marnier, we saw subdued growth in a competitive and muted market backdrop as we started to position the brand more effectively among its main consumer pool in the US, which recorded +3% growth during the year via partnerships, including a new one with Grammy Award-winning rapper Future.

Speaker Change: The under.

Speaker Change: The transfer pricing policies, we have in place.

Speaker Change: The one third that all large groups.

Speaker Change: <unk>.

Speaker Change: Profit.

Speaker Change: Relating to two each and any brand that seats and the legal entity, which owns the IP. So if you look at the <unk> in this specific case the owner of J P is a Mexican company. So most of the profit is clearly sitting in.

Speaker Change: In Mexico now clearly.

Speaker Change: Outflanks rules.

Speaker Change: We'll make sure that you're distributing company in this specific case company I'm Erica.

Speaker Change: Retains a margin that is comparable to the margin that's in a third party distributor would that would fetch from.

Speaker Change: Distribute.

Simon Hunt: Courvoisier, which as you know is still in perimeter given its consolidation as of May 2024, will be included in our organic growth in May this year. The cognac market remained challenging across its main markets, the US and China, in 2024, and right now we are planning to phase in our launch plans given the market backdrop. In the meantime, we've created a structure and brought in important experts into our team. Our new MD of this house has extensive experience in one of the other important brands in the category. Our CMO and head of strategy, the same in the other important brand. We also have the strongest bench of cognac experts on our board. For us, Courvoisier has a clear rationale. If we wanna be in this category, and we do, we have to acquire one of the scarce brands, and that has a cost.

Speaker Change: A distribution agreement with <unk>.

Speaker Change: Any principal so this is to say data base.

Speaker Change: Basically.

Speaker Change: Once you implemented the import tariff you would need to make sure that you're in market companies Silicon Valley America still gets.

Speaker Change: Fair.

Speaker Change: Margin as a percentage of revenues, which means that you have to take transfer prices down to offset the negative impact of import tariffs. So this is how it works.

Speaker Change: So <unk> is in a negative impact on that our current the initial estimates because you don't need to.

Speaker Change: News is just.

Speaker Change: Has been disclosed yet.

Speaker Change: Yes, <unk> is that it would come with 36.

Speaker Change: $35 6 million euros of negatively impact $35 four for current year $50 million on a non while last year, but this is before any mitigation. So clearly we're running.

Simon Hunt: This is an acquisition for the long term in a category that we believe in, and it will take time to turn around, but we have strong experience and we believe we can do it. For the rest, I won't comment too much, just to say that 25% of our overall portfolio is currently classified as local portfolio, given their geographic concentration, which by the way also includes agency brands, co-packing, and bulk activities, which make up 15% of local portfolio and corresponds to about 4% of group sales. We've already shared with you our intention for some portfolio streamlining in the upcoming period, and we'll share more on that when we can. SKYY remains an important part of our portfolio as we redefine its positioning. Now I'm gonna hand back to Paolo to go through the financial review.

Speaker Change: Studies from the price elasticity study, we need also to understand what competition will do to.

Speaker Change: That elasticity has to be put into the context of what competition is doing and then clearly there are other initiatives in our new new launches.

Speaker Change: You can kind of offset some of it by pushing.

Speaker Change: Pushing further.

Speaker Change: On international markets. So we are working on that so we do not have announcements. So we wanted to.

Speaker Change: Reiterate that what would be the worst case scenario in the case.

Speaker Change: We stayed.

Speaker Change: Our Calder.

<unk>.

Speaker Change: Absorbed but the negative impact of the Pathetics.

Speaker Change: Okay. Thanks.

Paolo Marchesini: Thank you, Simon. If you follow me to page 17 of the presentation, as you can see at the top of the chart, you know, notwithstanding a very tough year that we have to say has been negatively impacted by, you know, poor macro weather conditions, you know, some severe supply shortages and a very, you know, painful commercial dispute in Italy, as well as some disruption due to change in leadership at the back end of the year. In a perfect storm environment, the group still delivered an EBIT adjusted that was down just by 2.5%.

Speaker Change: The next question comes from Pamela <unk> of Airclic awesome.

Pamela: Hello, Hi, good afternoon, everybody.

Speaker Change: Okay.

Speaker Change: In person.

Speaker Change: So first of all sorry can I ask you could you speak a little louder, we can barely hear sure sure. Thanks, sorry about that.

Speaker Change: Yes.

Speaker Change: Can you hear me better now yes. My first question is about Uh huh.

Speaker Change: A lot of dynamics in them.

Speaker Change: Europe and later in particular in Q4 and so.

Speaker Change: What's the level of our stock.

Speaker Change: Great.

Paolo Marchesini: Now if we carve out the negative impact deriving from the additional depreciation and amortization due to the extraordinary CapEx program, the EBIT was actually in value up organically by 0.5% in such difficult conditions. Now, you know, the performance is a positive 2.4% net sales growth, a positive growth in value, gross profit increase of 2.4%. A&P has been stepped up in value by 1.1%, and so contribution after A&P was up in value 2.9%. Problem sits on the SG&A that were up in 2024 by 8.6% in value.

Speaker Change: You bet.

Speaker Change: How is that.

Speaker Change: So now I'm, calling them and.

Speaker Change: Secondly.

Speaker Change: A question in particular for the U S market.

Speaker Change: How about this.

Speaker Change: As.

Speaker Change: If you can comment.

Speaker Change: I appreciate it.

Speaker Change: Slide about the apparel penetration.

Speaker Change: Opportunity I was wondering if you can comment on the most recent data for apparel and want them.

Speaker Change: What do you think in terms of price positioning for apparel in the U S are you happy with that.

Speaker Change: Yeah.

Speaker Change: Without their own.

Speaker Change: Occasion of drinking out.

Speaker Change: Uh huh.

Speaker Change: Tom.

Speaker Change: The U S.

Speaker Change: And.

Paolo Marchesini: We want to highlight the fact that 55% of such SG&A increase was attributable to investments aimed at strengthening our commercial and marketing capabilities, as well as the creation of a new in-market company. You know, once you carve out that, you know, the rest is, you know, mere inflation on existing structural costs. Of course, you know, at the back end of the year, we've announced a cost-cutting initiative that we're implementing as we speak, that is aimed at containing SG&A as a percentage of revenues by 100 basis points by 2027 with, you know, first year of a 50 basis point SG&A as a percentage of revenues containment.

Speaker Change: Then a follow up question listen on the U S market.

Speaker Change: Uh huh.

Speaker Change: She that'll go out for myself RTD.

Speaker Change: And the last Q.

Speaker Change: A few quarters.

Speaker Change: At the industry level I was wondering whether you might.

Speaker Change: Peter.

Speaker Change: And more.

Speaker Change: Oh, that's a different approach, let's say on RTD.

Speaker Change: Our portfolio in this respect for the U S market.

Speaker Change: Possibly.

Speaker Change: Okay position.

Portfolio better to leverage on this trend I do think it's worthwhile.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: So the three questions. The first one is sell in sell out in Europe, I mean generally as you saw on the chart that was in the presentation.

Paolo Marchesini: Now, if we move on and look at the margin performance, we signal a satisfactory gross margin delivery for the full year. On the back of a very positive Q4 gross margin as a percentage of sales recovery accounting for 40 basis points. Here are some of the tailwinds that we were expecting for the year 2025, so for current year, have already materialized at the back end of last year, namely roughly EUR 10 million.

Speaker Change: We're in good shape in terms of the sellout data versus sell in so not starting with heavy inventories anywhere I think we're in a good position across all the markets in Europe haven't seen anything there that is concerning.

Speaker Change: Concerning.

Speaker Change: In terms of the second question around the potential of Apple in the U S. As I said, but.

Speaker Change: Interesting on this again, we're talking about banks of travelers question around opportunities.

Speaker Change: Is it half of America has never heard of Apple It certainly it's a good opportunity.

You then look at the distribution opportunities, we havent getting up over and above the huge opportunity there and that leads into the fact that and not forgetting that while the sellout data, particularly in the first set that we've seen in this year is negative in the off premise, you'll remember that 60% of alcohol sales are in the on premise and we continue to do very well as I said earlier, so I think.

Paolo Marchesini: Now, if you wanted to, you know, highlight the key, you know, drivers of, you know, the flat gross margin delivery as a percentage of revenues, we signal a positive pricing achievement, which is extremely good, given the intense promo backdrop, and such, you know, positive pricing achievement helped us offset a number of headwinds. First and foremost, the negative carry forward effect into 2024 coming from the absorption of 2023 high cost safety stock. Secondly, you know, quite a negative sales mix in critical operations peak season, Q2 and Q3.

Speaker Change: Ultimately on that.

Speaker Change: The potential is there from a pricing point of view it comes down to and drink.

Speaker Change: Really where the focus should be and how much in alcohol spirits is in the on premise and that's where we see a huge variation across the U S. Given the sites given the pricing, but at this stage given the positive performance of same young from US, we don't see the pricing being a barrier to.

Speaker Change: The opportunity for the brand going forward.

Speaker Change: I think the last question just on ready to drink, yes, great strengths are doing well the convenience play is interesting it is driving a lot of the.

Paolo Marchesini: Clearly lower absorption of fixed production costs due to the combination of lower volume produced on one end due to the absorption of safety stocks, as well as the negative impact of higher depreciation due to past extraordinary CapEx aimed at expanding our production capacity. On a positive note, we signal the fact that Espolòn is on track in Q4 of last year to achieve our goal of hitting, you know, a break-even gross margin as a percentage of revenues for the Espolòn brand vis-à-vis group gross margin as a percentage of revenues. On the A&P front, A&P has been contained by twenty basis points in full year due to, as said, you know, the lower activation programs in peak season, which was clearly negatively impacted by very poor weather conditions.

Speaker Change: The numbers at the moment.

Speaker Change: I think look it's an area where <unk> has an established history. When you talk about ready to drink already so yes, I think temporary still learning. This so bear with me, but 1932 was our first ready to drink.

Speaker Change: How many other companies can actually say that with Campari soda. So I think we have an area of expertise here, we all understand the category quite well and yes. There is an opportunity on our brands exactly what where how we don't know yet.

Speaker Change: As part of the process that we're working through the house of brands and we will come back plus some other but more of an update around what opportunities we see in that space and what we think we can do given outside of unique heritage in that space.

Speaker Change: Alright, Thank you very much.

Speaker Change: For any further questions. Please press star one on your Touchtone telephone.

Paolo Marchesini: Now we flag the fact that in the midterm, we aim at stepping up the EMP as a percentage of sales to the 17 to 17.5 percent, you know, bracket. That is where we see, you know, EMP trending in the midterm. Now, if you move on to the following slide, you know, starting from the sizable operating adjustment, we flag EUR 212.6 million of operating adjustments coming from restructuring and reorganization costs accounting for EUR 102.6 million. This is the whole cost for the three-year cost containment program. We've then impaired intangibles, so brands, by EUR 56.8 million. There is a cost tied to the business reset in Asia of EUR 26 million.

Robert: Gentlemen, there are no more questions Robert startup of time.

Speaker Change: Okay, great. Thank you all very much for your time and look forward to hopefully seeing you in person in the next few weeks or months. Thanks for your time.

Speaker Change: Ladies and gentlemen, thank you for joining the conference is now over and you may disconnect your telephones.

Paolo Marchesini: Some, you know, M&A fees for the Courvoisier transaction accounting for EUR 12.3 million and other minor operating adjustments relating to legal disputes and other indemnification. Now, if you follow, you know, the line of adjustments, we flag EUR 55.1 million of non-recurring impairment of investments. This is, you know, impairment of our stake into Dioniso, which is the holdco of Tannico and Ventealapropriete.com. We then have, on the back of such operating and adjustment and non-recurring impairments of investment, some tax relief, positive tax impact of EUR 92.8 million. Overall, you know, the overall bottom line impact of such adjustments accounts for EUR 174.4 million after tax.

Paolo Marchesini: You know, the EUR 174.4 million can be, you know, broken down into two buckets. The non-cash impact of it is EUR 107 million, and then we have EUR 67 million of cash flow outlays, of which EUR 55 million have already occurred in 2024. They are already factored into the year-end net financial position. The remainder, which is EUR 12 million, is for 2025 and 2026, and we signal a negative impact of EUR 37 million in 2025 and a positive impact of EUR 25 million in fiscal year 2026.

Paolo Marchesini: You know, among the other many things, you know, the total financial expenses came in at EUR 79.9 million, spot on with our guidance, and the average cost of net debt, you know, came in at 3.8% versus 3.3% of last year, as we have already, you know, anticipated.

Paolo Marchesini: Now, you know, on the tax front, you know, over and beyond the tax relief of EUR 92.8 million, we signal a recurring tax rate of 29.8%, which is up 180 basis points versus a year ago due to combination of factors, first and foremost, an unfavorable country mix and the completion of a selected trademark amortization for tax purposes, as well as the discontinuation of some income-tax incentives in Italy by our new government. The recurring cash tax rate is 26.6%.

Paolo Marchesini: If you move on to the following page 19, we highlight, you know, I said before, the fact that EBITDA adjusted, the recurring one is up 0.5%, EUR 3.7 million, vis-à-vis versus a year ago. The recurring cash flow from operating activities before any change in operating working capital came in at EUR 705 million, up EUR 122.7 million or 21.1% due to cash phasing effects in, primarily in Italy. The recurring free cash flow came in at EUR 586 million, up EUR 519 million, primarily due to, you know, positive delta in the change of operating working capital of year 2024 versus 2023 with a positive change in operating working capital.

Paolo Marchesini: A reduction in operating working capital of EUR 78 million in 2024 versus an increase of operating working capital of EUR 362 million in 2023. You know, interest paid, you know, marginally higher due to the higher indebtedness and maintenance CapEx up EUR 27 million to the level of EUR 140 million. Now we signal, you know, additional extraordinary CapEx negatively impacting fiscal year 2024 for EUR 300 million, including the purchase of the new headquarters building in Milan costing EUR 96.9 million.

Paolo Marchesini: For year 2025, we flag, you know, the fact that the multi-year extraordinary CapEx program comes to an end with a tail end effect of extraordinary CapEx for EUR 200 million. We signal, you know, a recurring free cash flow conversion, which is, you know, quite high 80%. A free cash flow conversion before change in working capital is, you know, the sustainable one at, you know, perspectively at 69%, you know, in line with, you know, the five-year average of 66%. If we move on to the following chart, you know, few key indicators. We see key performance indicator.

Paolo Marchesini: We see, you know, a very solid management of our, you know, operating working capital lever with operating working capital as a percentage of net sales on a like-for-like basis, so excluding Courvoisier. Coming down from 37.9% to 34.6%. A compression of 330 basis points that is coming on the back of, you know, the delivery of EUR 122 million of finished goods compression as, you know, already highlighted. Which has been, you know, partly offset by, you know, a step up in aging liquids of EUR 107 million to support the future development of our whiskey and rum portfolios.

Paolo Marchesini: Still within the operating working capital, we flag another positive impact of a negative impact of EUR 72 million coming from, you know, an increase in payables of EUR 126 million and an increase in receivables, sorry, of EUR 55 million. Then on the CapEx, we said 440 was the total amount of CapEx spent in 2024, with EUR 139 million maintenance and 300 million euros in extraordinary. Free cash flow conversion as said, you know, extremely strong at net of operating working capital at 69%.

Paolo Marchesini: You know, the recurring free cash flow at EUR 586 million, positively impacted by change in operating working capital. You know, the total free cash flow turned positive in 2024 with a cash increase of EUR 173 million. Now on a positive note, you see, you know, that we've managed to contain the net debt to EBITDA ratio by 0.3 turns from 3.5x to 3.2x. We're expecting to continue our, you know, the leverage, you know, pattern also in 2025, notwithstanding the tail end effect of the EUR 200 million extraordinary CapEx. I think, you know, this is it on the numbers.

Paolo Marchesini: I would, you know, hand back to you, Simon, for the ESG piece.

Simon Hunt: Great. Thanks, Paolo. I'm gonna do a quick summary of the ESG initiatives, and quick not 'cause it's not important. I can confirm we're fully committed to our ESG journey, but quick in the interest of time to leave a bit of space for questions. So far, we've recorded significant steps in this journey. We continue to have ambitious targets and developments which will continue. One of the key developments is that for the first time, we're reporting a double materiality assessment in line with CSRD requirements, and you can find the full details in our financial statements. We also became a signatory to UN Global Compact this year and increased significantly our S&P Global ESG rating to above the industry average.

Simon Hunt: We also strengthened the structure of our operational sustainability committee, which is made up of representatives from all of our key related teams within Campari to ensure a coordinated response. Plus, the board committee, which is governing ESG, changed its remit from just control and risk to control risks and sustainability to reinforce the focus and governance. In terms of how we track ESG, we're focusing on four main areas: environment, responsible practices, community involvement, and people. In all these areas, we have and will continue to take steps to ensure the attainment of our targets, as well as to support and educate the community. Next is an update on our cost containment and portfolio streamlining, which we announced in our Q3 results call.

Simon Hunt: On the cost containment, we've announced our target to achieve 200 basis points benefits on SG&A over the net sales in 3 years by 2027, and this is confirmed on the 2024 reclassified EBIT, leading to operating leverage and a margin-accretive profile in structured costs. There was some recent news in the market regarding the headcount decrease, but as the consultation process is currently ongoing, I'm not in a position to give details on this topic. As you saw before, we've recorded operating adjustments of EUR 103 million in 2024, which cover the majority of the impact expected over the 3 years via accruals.

Simon Hunt: The actions we're taking are supported by the House of Brands operating model, as well as review of other areas such as the structures of our global functions and regions, as well as other people and non-people related cost base, with 60% of the actions already completed in the first two months of the year and benefits starting to be visible as of H2. On portfolio streamlining, we don't have any further updates, as I said. Currently, we're looking at the opportunities with a view to ensure we optimize the potential proceeds we can get. Now moving on to the outlook. First, let's focus on 2025. In the context of the current low visibility as to the duration of the cyclical macro headwinds, we view 2025 as a transition year. Moderate organic full-year top line growth will continue with an improving trend in H2.

Simon Hunt: The timing of Easter will drive a phasing of shipments leading to a low single-digit decline in Q1, mainly driven by the European markets, followed by progressive improvement as markets continue to get back to normal consumption patterns in the balance of the year. We expect organic EBIT-adjusted margin to be directionally flat for the year, driven by three things. First, the gross margin trend dependent on sales mix evolution despite the confirmed COGS tailwinds. Second, the step up of A&P from 16.7% to a level within the historic normalized range of 17% to 17.5%. Finally, SG&A containment program initiated with about 50 basis points benefit on sales in 2025 phased into H2. Accordingly, EBIT-adjusted performance to be skewed into H2 due to adverse phasing of gross margin improvement, A&P spend and SG&A savings.

Simon Hunt: We're also estimating that the recently announced 25% tariffs being imposed on imports from Mexico and Canada into US will potentially create around EUR 50 million annualized impact for us. If we also simulate potential tariffs for Europe, the total could be between EUR 90 to 100 million annualized impact before any potential mitigation actions, which are currently under assessment, and, to be clear, are not included in the above guidance. For 2025 specifically, the impact will be lower given that 2 months has passed and we also have inventory in place. Therefore, around a EUR 35 million impact from Mexico and Canada before mitigating actions. In terms of medium long term outlook, we confirm our previous guidance.

Simon Hunt: Confidence in continued outperformance and market share gains, leveraging strong brands in growing categories with a gradual return in the medium term to mid- to high-single-digit organic net sales growth in a normalized macro environment before the impact of potential tariffs. Secondly, gross margin expected to benefit from sales growth, positive sales mix driven by Aperitifs, tequila, and premiumization across the portfolio, as well as COGS efficiencies. Thirdly, EBIT margin accretion, in addition to the benefit on gross margin, will also be supported by key company initiatives delivering 200 basis points overall benefit on SG&A as a percent of net sales in three years and increased efficiency in brand building spend. Let me finish by saying that again, we plan to come back and provide more details with you about our future plans towards the summer.

Simon Hunt: I'm currently meeting the teams, getting to grips with all the details, and then we'll build on what we've shared so far with more specifics on our path forward. We can now open up the questions. Thank you.

Operator: Thank you, sir. This is the conference call operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use handsets when asking questions. The first question comes from Andrea Pistacchi of Bank of America.

Andrea Pistacchi: Yeah, good evening, Simon, and Paolo. I have three questions, please. First, I mean, probably all for Simon, but you're confident, of course, that Campari will continue to outperform the industry. Look with a lot of strong brands in the portfolio, the potential you highlight for geographic expansion, and I guess even the low penetration that you're also highlighting, and relatively low market shares in some markets like the US. There's clearly a lot of growth opportunities. The question here is how do you prioritize these growth opportunities? What are the key growth priorities in terms of categories and geographies that you see? Is there anything different here?

Andrea Pistacchi: Anything you're thinking of emphasizing more than Campari's brands or geographies or vice versa? The second question, which is clearly connected to this. Now given all these opportunities for driving top-line growth, how are you thinking about A&P reinvestment going forward and the trade-off between top-line and margin? I think for 2025 you said that you intend to go back to the historical 17 to 17.5% range. Do you see this also as the right range for the longer term? My third question is more on 2025. You're not, of course, providing specific guidance, but you're saying that the ongoing, let's say, muted top-line trend given the environment should continue. You've told us about Q1.

Andrea Pistacchi: Now when you think of the comps you face over the year, in the various regions, the market trends, what's going on in the markets, are you able to give some regional color, sort of what regions you expect you could see an improvement versus last year? Where on the contrary, you feel the outlook is probably still too uncertain to call.

Simon Hunt: Okay. Great. Yeah, look, some great questions there. I will caveat all of these questions, which is I'm six weeks in. As a result, I will be as clear as I can be at this stage, but I'm sure you understand I'm not gonna be concrete in terms of the path at this stage as I get around the business. Taking your questions one by one. The first one is in terms of confident outlook. What's interesting in terms of coming into the business and seeing the current negativity within the industry and in the reporting that we've seen over the past couple of months.

Simon Hunt: Against that backdrop, and then you look at the company performance that with a CEO change, with the Courvoisier integration, with all the cyclical impacts that everyone is talking about, and all the other challenges we've seen from a macroeconomic point of view and geopolitical volatility, the business still managed to grow and deliver good growth across most of the brands in most of the markets. Against that backdrop, that's one of the reasons why I'm confident in terms of the opportunity going forward, is that the team shows what it's capable of doing in a very tough market. I do think as the markets continue to improve, that puts us in a very good position. To your second question around the opportunities, you're absolutely right. We have still low penetration in many markets around the world.

Simon Hunt: We also have less geographic spread than most of the companies I've worked in before. We have you know, very small presence in Africa, the Middle East. Still LATAM is very small, and in Southeast Asia, just to give you those examples. Clearly we can't afford to develop all of these at the same time. In terms of the funding on the A&P, I think we're gonna be reviewing what we think we need to be pragmatic and have a planned growth over a number of years. Work out how we're gonna fund that against the existing route to market capabilities that we have. If I then look at what are the sources of funding, well, clearly some of the cost containment programs that you've already heard from Paolo about will be one of the ways that we can do that.

Simon Hunt: More specifically, we're taking the time to review really the four areas around this. Top line revenue management and what we think we can do there. The second area is around opportunities in cost of goods and further building on the CapEx investments that have been made and driving greater efficiency out of it. Third is more efficient and effective deployment of A&P through the House of Brands model. Really gives us that oversight globally for each of the brands. Finally, clearly the SG&A efficiencies. When I take those and I look at the opportunities, I work with the team, which is the process we're working through now.

Simon Hunt: We're in a position where we'll come out towards the summer with more information as to what our plan is, the market share ambition we have in different markets, how we want to fund it. Really the last part for me is also leveraging what I think is a truly unique competitive advantage, which is the Campari culture and the quality of the team that we've got to work with. You put all those things together, I think that's why I'm confident in terms of direction and hopefully that explains the process that we're gonna work through.

Andrea Pistacchi: Yeah. Any color on 2025 regionally? What moving parts?

Simon Hunt: Yeah. I think if we continue some of the trends on this, I think we'll see some faster growth in the Americas. Recognizing that the US may be impacted by tariffs, but I think it is a moving feast as we all see on a daily basis at the moment, so we're gonna have to see what happens there. Better contribution from Jamaica after a tough year, and hopefully we won't see a repeat of the impact of the hurricane. As I said earlier, the other markets are growing well. Actually in some of the outside of the top six markets, you're seeing some good growth in EMEA. We're seeing some good growth in Asia Pacific bouncing back. As I said earlier, I think there's further opportunities to really take the portfolio into more markets.

Simon Hunt: It's been quite selective around individual markets, only really pushing two or three brands. I think there's more of an opportunity to leverage our route to market.

Andrea Pistacchi: Great. Thank you very much.

Operator: The next question is from Edward Mundy of Jefferies.

Edward Mundy: Evening, Simon and Paolo. I've got three questions as well, please. Simon, the first one is, you know, you know this industry very well. There's clearly an ongoing debate going on around current weakness, to what extent it's cyclical and structural. I think you're pointing to the cyclicality as the biggest driver. And I appreciate that 2025 is a year of transition. I guess what gives you confidence that, you know, majority of the headwinds are cyclical? Is the first question. And the second question, you sort of mentioned something very interesting in your opening remarks about bringing different optics to support and extract the full potential, you know, of this business.

Edward Mundy: Appreciate you're only six weeks in, but sort of any very, very early preliminary thoughts around that would be, you know, very interesting either by House of Brands or geography. Then third of all, you also mentioned sort of a healthy tension between House of Brands and the regional market companies. I guess, you know, where you've seen this work effectively. Are there any sort of tangible things that Campari could be doing that it's not currently doing, you know, when that's implemented effectively?

Simon Hunt: Yeah, Ed, thank you. Yeah, very good questions. I mean, I think, look, in terms of the industry, there's a lot of speculation as to what is going on. My view at this stage is that people are taking quite disparate data points and turning it into a macro trend. Reacting quite negatively about the potential for what is a highly profitable, and truly global industry. The first point on this is that moderation. Moderation has been a story for 60 years. This is not a new story. As a result, in terms of, you know, de-highlighting changing consumer trends, I think that is part and parcel of actually working in this industry. I've been in it for 30 years. We've seen these challenges come before. We've heard that cognac is dead.

Simon Hunt: We've heard that vodka has had its day, that rum is coming again. Ultimately on this, it's probably where I'm confident in terms of the cyclical nature of some of this feedback. I do think at the moment, though, we are in a unique situation within, certainly from my experience, and that is the fact that for the first time, every market around the world is down at the same time. As you know, quite often there'll be a market down or two markets down, but there'll be markets to offset. This is the first time we've had a China, a Russia, a US, a LATAM, all of the markets down at the same time. As a result, there are a lot less opportunities to mitigate downward trends in some of the markets.

Simon Hunt: From a macro point of view, I do think the current economic environment is really doing two things. One is it's limiting companies' abilities to mitigate challenging markets. The second thing is I think consumers are really looking at how they're spending their money. I think you see that as a continued trend. As a result, we've been here before, and I do think consumer behavior will come back. I think it will be a bit different. I think we're seeing an evolution on some of the occasions. But ultimately on this, I think we're extremely well positioned to target those occasions in a with a portfolio that is both aspirational and affordable at the same time. From that point of view, I do, I'm positive that it is cyclical and not structural.

Simon Hunt: I think the second thing in terms of different optics on it, again, every company is a little different and the culture is different in the way they'll look at opportunities. At this stage, I'll just give you a point of view that hopefully I'll be able to build on in a few more months when I've had a bit more time with the team. The first one is that Campari has been incredibly successful for many, many years. As a result, some of the choices have been, you know, less difficult to make, I guess, because the business just kept delivering and kept delivering. If I compare it to other companies I've worked in, I think we've had to be more selective around the choices that we've made.

Simon Hunt: I think that's one of the areas that I can definitely bring a different perspective on. The second area would be around the continued success of the M&A agenda. I think we've got some amazing brands, but I do think that they've got further legs that we can run with what we've got. At the moment, if you look at the brands we've acquired, really, they've got areas of strength in three or four markets as opposed to 10 or 15. That leads into the House of Brands structure, which ultimately is designed to do exactly that. It creates, you know, a single-minded focus.

Simon Hunt: I've seen both a central marketing team and a House of Brands model and various iterations of both of them before. The benefit of a house model is you've got a team of people that wake up every morning and all they think about all day, every day is Courvoisier. That is different than when it's in a global marketing structure. Because they are managing the brand holistically with operations, supply chain, innovation, and also working with the markets directly, it creates a really healthy tension about making sure that all the brands are getting the right focus in the right markets to deliver the corporate growth that we believe these brands can deliver. That's really where I see it operating quite differently.

Simon Hunt: I think it will be a change for Campari, but a very positive change that fits really well with the Campari is the culture, quite entrepreneurial, really get on with it, make things happen. Hopefully that answers your questions.

Edward Mundy: Thanks, Simon.

Operator: The next question comes from Chris Pitcher of Redburn Atlantic.

Chris Pitcher: Thanks very much, Simon, Paolo. A couple of questions for me. I mean, Simon, first of all, when you mentioned you were holding off on acquisitions in the near term, and it's more a focus on divestments. And I appreciate you've only been there for a couple of months. In terms of the longer-term strategy and vision for the portfolio, I mean, the heart of Campari was very much its position in aperitifs. Over the last few years, capital has been deployed into aged spirits such as Courvoisier. And maybe you could comment a bit about the Capevin minority stake, which looks to be a precursor to move into Scotch. Is the sort of longer-term view to almost build out into that deploy capital into an area that's very different to the old Campari story?

Chris Pitcher: Then maybe in addition to that, maybe more a question for Paolo, the CapEx program continues into this year. You're expanding bourbon and tequila capacity. Once you've expanded that capacity, given everything that's gone on in the industry and the potential supply imbalance, are you gonna ramp those up straight away, or should we expect a more modest outlook for maturing spirits investment? Maybe an addendum, sorry, for Courvoisier. I imagine that could well be a source of cash, given you've got just short 400 million of stock on the balance sheet, which looks to be a bit much compared to what you're selling. Thanks.

Simon Hunt: Okay, Chris. Yeah, look, a couple of things. In terms of, you know, the pause on M&A is genuinely that I feel that we have an incredible portfolio to work with already and that the existing portfolio has got legs beyond, you know, kind of where we are today. I think that's the first thing. Second part is definitely in terms of opportunities to divest. I think the reason for acquiring some of those brands has changed as the business has grown, and we're now in a position that the strategic role that they were playing is probably less strategic than it was five, 10, or even 15 years ago. We will have a look at divesting, but in the current environment, it's making sure we can achieve the right value for those brands.

Simon Hunt: I think longer term, yeah, we'll continue to have a look at opportunities in M&A, but for now we need to focus on deleveraging. We need to focus on getting the existing assets working as hard as they possibly can. I think in terms of more of a portfolio strategy, which is a lot of the work we're doing at the moment, I think there are probably three areas that better explain our thinking going forward. Again, hopefully we'll have more of this, as we come back towards the summer. The first is we have a unique global leadership position in aperitifs, and as a result, that gives us access to the on-premise more so than any category I think I've worked in.

Simon Hunt: As a result, that is a door opener for the rest of the portfolio, not only in terms of the strength that it has in the on-premise already, and I think a lot more that we can do with it. Secondly, in terms of then leveraging a relevant portfolio, which is a combination of both aged and non-aged brands, and that's where the rest of the portfolio comes in. The third part of the portfolio is leveraging our Non-Alcs. We have a fantastic brand in Crodino, that, you know, Non-Alcs is a new category for most companies. For us, it was originally created in 1965. So this is something that's been around for a long time as a non-alcoholic spritz, and we see some really good opportunities to leverage that going forward.

Simon Hunt: I think in terms of answering your questions, hopefully that gives you a bit of a flavor of the portfolio that we're looking at going forward. In terms of the investment in Capevin, it's a foot in the door, and I think we'll see how things progress there. Very early stages. In terms of CapEx, I'll pass this over to Paolo in just a second. I just top line view is the investment that has gone in is fantastic. It's fantastic because it's now built the capacity that we need and a lot of the capabilities that we're gonna need for the growth that we think will happen over the next 5 or 10 years. As a result, I know it's a hefty investment, but puts us in a very good shape.

Simon Hunt: I don't know if you wanna cover off something else.

Paolo Marchesini: Yeah. Yeah. I think, you know, the investments, you know, the EUR 500 to 600 million total in CapEx plan, you know, were aimed at basically tripling the distilling capacity in Arandas for Espolòn brand, as well as tripling the bottling capacity in that plant. There in the plan, we had, you know, the doubling of the distilling capacity of Wild Turkey, and the doubling of the bottling capacity for our Aperitifs portfolio. For a number of years, I think, you know, we're fine with the investment that we've done. As you know, Simon just said.

Paolo Marchesini: You know, looking at the future beyond that, we're also thinking at the possibility of outsourcing some of our bottling activities, you know, also to diversify, you know, for a business continuity perspective. Now on aging liquid, clearly, you know, following the acquisition of Courvoisier and the first time consolidation of the EUR 400+ million of aging liquid, we're sitting over EUR 1.2 billion of aging liquid, which is, you know, what we need, taking into consideration that, you know, both on Courvoisier, on our Bourbons, as well as Rums and Glen Grant, which is, you know, important brand to us to build our presence in Asia as well.

Paolo Marchesini: We think we're fine with the liquid that we have. We don't sense that we need to lay down more and beyond what we done year after year. On the other hand, we're not considering the possibility of, you know, divesting the liquid that we have because that would compromise our ability to develop those brands in the future.

Simon Hunt: Thank you. Very clear.

Operator: The next question is from Sanjeet Aujla of UBS.

Sanjeet Aujla: Good evening, Simon and Paolo. Three from me as well, please. Firstly, can you talk to where wholesaler and retailer inventory levels are, particularly in the US, and what your outlook is for shipments in 2025 there? Secondly, we've seen a bit of a slowdown in Espolòn. I appreciate there's some de-stocking in Q4, but some of the sellout data has certainly softened through Q4 on the start of the year. I'd love to get your take on what you think is happening there within the category and Espolòn's positioning. And thirdly, can you just talk a little bit about the pricing outlook for 2025 and gross margins in a little bit more detail? I think Paolo, Q3, you spoke to 19 basis points of tailwinds from several moving parts.

Sanjeet Aujla: Would appreciate an update on that as well, please. Thank you.

Simon Hunt: Okay. Thanks, Sanjit. Yes, I mean, in terms of the wholesaler days at this stage, I think, you know, the team finished out the year with pretty balanced across them. You know, a few brands are down, a few brands are up, but generally in pretty good shape in terms of doing it. I'm not starting with heavy inventory at a wholesale level. I think it really depends a little bit, in answering your question, both for wholesale and retailer, what happens with tariffs? We've had the news as of yesterday. It depends whether those tariffs, you know, extend into other regions.

Simon Hunt: Does that put forward pressure on shipments to actually try to move things in? As I said in my comments, you know, we've tried to maximize as best we can on short notice the inventory positions of some of the brands that may be affected. Ultimately, I think that's gonna be a bigger driver of what the shipment patterns are than really the depletion trends at this stage. I think in terms of for Espolòn, again, you see every day there's been since the beginning of the year, there are tariffs, there are no tariffs, there are tariffs, there are no tariffs. As a result, I think that has created some nervousness around the category generally.

Simon Hunt: Again, we've also got to be balanced that Espolòn's performance in the on-premise continues to be extremely good. While we see some softness in the off-premise, we're still seeing very encouraging trends in the on-premise. As we look to really kind of sharpen our execution and our efficiency, it's then seeing how can we accelerate on that on-premise strength we have, recognizing the off-premise is gonna be a bit crowded through the balance of the year. In terms of pricing margins, I'll pass over to Paolo.

Paolo Marchesini: You know, on margins, we've clearly stated our objective of achieving a flat EBIT margin on a full year basis, excluding as we've clearly stated the impact of any tariff increase. That at the moment based off the most recent news is costing us EUR 35 million in 2025 for Mexico imports, which is roughly 110 basis points dilution on our EBIT margin before any mitigation, because clearly we will develop plans.

Paolo Marchesini: Now, if you look at the, you know, the key drivers of, you know, flat EBIT margin on a like-for-like basis excluding tariffs, you know, clearly we have confirmed, you know, the intent to deliver the 50 basis point SG&A as a percentage of revenues containment. That's a tick. Directionally, we intend to step up our A&P investment also in year twenty-- starting from 2025. Most likely A&P as a percentage of revenues will come in at between 17% and 17.5%, of NS, of net sales.

Paolo Marchesini: Vis-à-vis the gross margin, which is the point that you've just made, you know, clearly in the back end of the year, we've alluded to potential net tailwind of EUR 30 million coming from different tailwinds and headwinds. I would not go back to that. You know, as I have flagged before, some of those thirty million euros, namely EUR 10 million, have been already pulled forward into Q4 of 2024. It's already in the base, if you will.

Paolo Marchesini: Now, if you look at, you know, pricing, clearly, you know, pricing is extremely, you know, the promo environment is extremely tense, you know, particularly in, I would say, you know, in Europe and, you know, somehow, you know, in US as well. You know, clearly our strength in on-trade space is an offset to the pressure we're seeing. On the other hand, you know, looking at the past, you know, precedents, you know, whenever we had a commercial dispute, you know, we've proved to be, you know, extremely resilient. We've accepted, you know, the fact that the delisting and eventually we came back with stronger pricing.

Paolo Marchesini: There is an element of risk in pricing that we have to put into the equation. You know, most importantly, I think, you know, the sales mix will play, you know, a big role here in Q2 and Q3. Jury is out, you know, we still believe that, you know, our, particularly our Aperitif portfolio has traction, so that will help us, you know, offset all the pressure that we have. You know, directionally at the beginning of the year, we would rather see, you know, gross margin as a percentage of revenues are fairly flattish. Now, if you look at the phasing, which I believe is your other point.

Paolo Marchesini: You know, starting from the top line, you know, as the time goes by, quarter after quarter, we sense that we will have, you know, more and more traction. You know, Q1 is a soft top line quarter due to, you know, Easter phasing. That's a factor. Vis-à-vis, you know, gross profit, as a percentage of revenues, we're expecting, you know, an improvement, you know, in Q2, Q3, in peak quarter for the Aperitifs. The A&P, you know, the phasing is, you know, somehow front loaded. Q1 and potentially also Q2 would be negatively impacted by that. We will implement, you know, a stage-gate approach.

Paolo Marchesini: You know, we will not overspend beyond, you know, if we're not, you know, relatively confident that, you know, there is traction. Vis-à-vis the, you know, the cost containment program, that it is to deliver the 50 basis points, clearly given, you know, the fact that, you know, in many markets, you know, that the initiatives are, basically, going through, the, you know, the consultation with the union. The phasing is very much into, you know, the back end of the year of the savings. We will have in that sense, you know, adverse impact on the three things, you know, negative phasing more than adverse.

Paolo Marchesini: Negative phasing across quarters on gross profit, A&P, and SG&A with, you know, gross profit improving over time, A&P, you know, stronger at the beginning of the year and lighter at the end of the year. SG&A, you know, the key, you know, benefits would be in Q3 and Q4.

Simon Hunt: Many thanks.

Sanjeet Aujla: Many thanks.

Paolo Marchesini: The next question comes from Simon Hales at Citi.

Operator: The next question comes from Simon Hales at Citi.

Simon Hales: Good evening all and welcome Simon, and hi Paolo. I've got a couple of questions, please. Maybe firstly, I wonder if I could just follow up on some of your remarks there, Paolo, in relation to the gross margin, just so I have this clear. I think you said that EUR 10 million of the EUR 30 million benefit that you thought was going to fall in 2025 was pulled forward into Q4. You know, what is that? Is that agave related? Because I think also back at the Q3 stage, we were talking about potentially on top of the EUR 30 million, further sort of benefits to COGS coming from sort of glass logistics and things. So I'm just still trying to square that circle.

Simon Hales: It looks pretty conservative, your flat margin guidance, particularly as we get into the second half of the year and you lap through the destocking we've seen on things like Campari in Q3, and also the disruption of Jamaica. Am I missing anything there? Secondly, just on Courvoisier, can I just ask, you know, did Courvoisier contribute positively in aggregate to group EBIT in fiscal 2024? And as we look to 2025, are you happy with stock levels in trade for Courvoisier in your core markets? And does your overall guidance for 2025 as it stands pre any tariffs expect that Courvoisier will be a bit positive in 2025 as well?

Paolo Marchesini: Yes. On the first one on gross margin, it's you know the EUR 10 million brought forward is coming from you know multiple drivers. You know, there is a little bit of you know agave, as you correctly you know pointed out. You know, we had you know some positive you know discussion with the glass suppliers. You know, of course you know, we have a little bit of drift on additional D&A for next year due to the extraordinary CapEx program.

Paolo Marchesini: On logistics cost, you know, sorry, we've managed to repatriate some of the savings earlier than expected. Overall, basically we're expecting to land on tailwinds where we wanted to be. If you take 2024 and 2025 as a whole, you know, it's not just one element. On Courvoisier, you know, I think, Simon, whether you want-

Simon Hunt: Yeah, I'm happy to take it. I mean, in terms of the days, Simon, at the moment, from what we've seen, there's a few markets where post-acquisition, I think the team has now been cleaning up the days. They're a bit heavy in some of the markets in Asia, which the team has been working through. But in terms of core markets of US and UK, no real concerns in terms of days of stock. I think we will have to again see what happens if we suddenly start seeing tariffs come in, then again, my same comment would come back that we would see, you know, what we could accelerate to try and mitigate some of that, but we'll have to wait and see.

Simon Hales: Good. Got it. Was Courvoisier positive to EBIT in 2024, and would you expect it to contribute positively in 2025? Or is investment going to mean that it's probably more subdued?

Paolo Marchesini: Yeah. It will be positive, but you know, the improvement will be, you know, clearly limited because it's, you know, the very first full year we managed the brand, so we step up A&P spend. Of course, you know, over time, the objective is to improve the Courvoisier gross margin as a percentage of revenues. 'Cause, you know, it's in the 35% gross margin as a percentage of revenues area. You know, clearly that unsatisfactory gross margin as a percentage of revenues is coming from a number of reasons. There is under absorption of fixed production costs at Jarnac plant, given the reduced volumes.

Paolo Marchesini: You know, the cost of the eau de vie, you know, the ones that we're currently buying, is quite high, yes, you know, in terms of pricing. We see, you know, in the future potential for, you know, further closing the gap versus, you know, particularly the market incumbent in the US market. You know, outside of the US, the brand is doing nicely in the UK, in Europe. Clearly, you know, Asia is very, very small, so wouldn't, you know, move the needle. I think, you know, it's combination of, you know, reduction of COGS in value per liter and as a percentage of revenues and improvement of the net sales per liter, the price.

Simon Hales: Brilliant. Thank you very much, both.

Operator: The next question is from Trevor Stirling of Bernstein.

Trevor Stirling: Hi. Is it Simon and Paolo? Let me just say, Simon, welcome to the delights of the sell-side Q&A, Simon. Two questions from my side. One, Simon, if you look at the first six weeks so far, they feel like six months, and compared to all your due diligence, what surprised you about Campari now you're actually in the bowels of the organization, if you like? Second question for you, a little bit for you, a little bit for Paolo. You delivered 2.5% organic top-line growth last year. In 2025, you should have some easy comps on destocking in the US and Italy. You've got these easy comps on the hurricane in the UK and Jamaica, and who knows where the European weather will go.

Trevor Stirling: That does look like we should be thinking at something north of 2.5 in 2025. Appreciate that there's a lot of uncertainties out there, and there's a transition year and all the caveats. Directionally, 2025 should be a better year than 2024.

Simon Hunt: Yeah. Trevor, thank you for your warm welcome. It's always good to be put on the spot and ask these questions. I'm six weeks in. What's different from what I thought? I think I'll probably keep it pretty simple around three things. One is the culture. I think the Campari culture and the passion that the Campari team have for the business, for the brands is one of the strongest cultures I've seen. And as a result, I think it's a real competitive advantage that I look forward to seeing how we can really develop that going forward even further. I think the second part as well is getting to know the team. I'm very lucky to have some, you know, incredibly experienced people like Paolo, who have been with the business for a long time.

Simon Hunt: You all know him very well. He knows the business backwards. I can ask a load of silly questions about what I think, and he's very open, and we get on very well. It's been a good kind of opportunity for us to work together as a team. Then more broadly beyond that as well, just the quality of the team. It's a very good team. That gives me a lot of confidence in terms of our ambition going forward. The third thing for me is the opportunity. I came here because I believed in the brand, I believed in the family ownership, and I believed in the potential. Again, every day I'm here, I'm feeling more positive about that decision, put it that way.

Simon Hunt: I think there's a lot that we can do with what we've got, and very excited about the opportunities going forward. Hopefully that gives you my kind of perspective on a six-week basis. Just in terms of, I'll hand over to Paolo in terms of specifics on the numbers, but I think it's a fair question around, are the numbers being cautious. At this stage, there is so much volatility. If I'm totally honest, if we sat here for an outlook and told you it was gonna be significantly greater than that, I think we would not be acting particularly responsibly given the volatility in the marketplace. As a result, I think we'll continue to go after every opportunity we can, but also we need to be pragmatic about what we can't control. Paolo.

Paolo Marchesini: Yes. Yeah, I think, you know, Trevor, you know the 2.5% top line, you know, growth that we delivered last year, and, you know, most importantly, the 2.9% contribution after A&P, you know, delivery is quite robust given, you know, the perfect storm we've gone through last year. If you look into 2025, of course, you know that bodes well for positive delivery. On the other hand, you know, in Q3 of last year, we burnt our hands on a very disappointing quarter, so we do not want to end up in the very same situation.

Paolo Marchesini: I think, you know, there are opportunities, but there are also, you know, risks, you know, that we have to put into the equation. You know, for a player like Campari, who is, you know, extremely disciplined in managing price, pricing and in, you know, putting focus on the on-trade and avoid, you know, cutting the corners by, you know, aggressively pushing brands in the off-trade. Clearly, you know, the risk of commercial negotiation is probably higher than in other cases. As you know, last year, we basically lost EUR 25 million of revenues due to a commercial dispute.

Paolo Marchesini: You know, these things happen and so I think, you know, we need to recognize that this is why, you know, at this stage, we're not giving, you know, a guidance on top line. You know, overall, we feel positive vis-à-vis, you know, 2025 top line delivery.

Simon Hunt: Superb. Thank you, Simon and Paolo.

Paolo Marchesini: Thanks.

Operator: The next question is from Alessandro Tortora of Mediobanca.

Alessandro Tortora: Yes, hi. Good evening to everybody. I have, let's say, two questions. The first one, it's a follow-up on your comment on the aging liquid. Considering, let's say, the overall performance on the working capital, which kind of path we may forecast, let's say, going forward? Basically, do you see a further normalization of this ratio? That's the first question. Thanks.

Simon Hunt: Okay. I'll take it more from a brand strategy point of view at this stage, which is the whole House of Brands model has been in place for, I think, about five weeks. As a result, we wanna give the teams the time to actually step back and look at the portfolio, the impact on the aging liquid. At this stage, I think it's fair to say that when we look at the brand portfolios, we under index on higher marks on most of the aging liquids. As a result, whether or not we've got the right profile now or whether teams need to develop that over a period of time will influence some of that decision. I'm not sure if that answers your question.

Alessandro Tortora: Yes.

Paolo Marchesini: You know, there is, you know, probably, you know, you were alluding to the one-off reduction in finished goods that we've achieved last year, whether, you know, this is, you know, recurring in coming years, no. Basically, you know, the target is, you know, to keep, you know, operating working capital as a percentage of revenues flat in coming years. Of course, you know, we'll do our best to improve it, but, you know, this is directionally, you know, the guidance. In terms of days forward coverage for finished goods, I think, you know, we're at a level which is, in our point of view, sustainable.

Paolo Marchesini: Of course, you can go, you know, over and beyond that, but that would compromise the service level. You know, we would not push that envelope that far.

Alessandro Tortora: Mm-hmm.

Paolo Marchesini: That's in your model. Basically, the operating working capital will follow the top line increase in 25 and in coming years.

Alessandro Tortora: Okay. Okay. Thanks. Then the second question is, thanks for your, let's say, indication on the tariff impact and so on. But, can you also elaborate a little bit more on how the effects, I'm referring to the US dollar, but also to the Mexican peso, how this will play for you, basically.

Alessandro Tortora: If I have to look also at Mexico, basically the recent depreciation on Mexican peso is relevant and would be a relevant mitigant, or considering your indication. Thanks.

Paolo Marchesini: Yes. Well, the way, you know, it works is that, you know, under the transfer pricing policies we have in place that are, you know, the ones that all, you know, large groups, you know, implement. The profit, you know, relating to which any brand that sits, you know, in the legal entity which owns, you know, the IP. If you look at, you know, Espolòn in this specific case, you know, the owner of the IP is a Mexican company. You know most of the profit is clearly sitting in Mexico.

Paolo Marchesini: Now, clearly, you know, under you know arm's length rules, you make sure that your distributing company, i.e., in this specific case, you know, Campari America, you know, retains a margin that is, you know, comparable to the margin that, you know, third party distributor would fetch from a distribution agreement with

Alessandro Tortora: Mm-hmm

Paolo Marchesini: Any principal. This is to say that, you know, basically, once you implement the import tariffs, you need to make sure that your in-market company, so Campari America, still, you know, gets, you know, the fair, you know, margin as a percentage of revenues, which means that you have to take, you know, transfer prices down to offset the negative impact of import tariffs. This is, you know, how it works.

Paolo Marchesini: You know, as said, you know, this is, you know, a negative impact, you know, under our current initial estimates, because, you know, the news is just, you know, disclosed yesterday, a few hours ago, is that it would come with EUR 35, 36 million of a negative impact, EUR 35 million for current year, you know, EUR 50 million on an annual year. But this is before any mitigation. You know, clearly we're running, you know, different studies, you know, from a price elasticity study. We need also to understand what competition would do to not only that, but, you know, elasticity has to be put into the context of what competition is doing.

Paolo Marchesini: Clearly there are other, you know, initiatives, you know, new launches. You know, you can offset some of it via, you know, pushing further Espolòn in international markets. We're working on that, so we do not have an answer. We wanted to reiterate what would be the worst case scenario in the case, you know, we stayed, you know, on hold and simply, you know, absorb the negative impact of the import tariffs.

Alessandro Tortora: Okay, thanks.

Operator: The next question comes from Paola Carboni of Equita SIM.

Paola Carboni: Yes, hello. Hi. Good afternoon, everybody, and welcome to Simon. Looking forward to meeting you in person. First of all-

Paolo Marchesini: Sorry, could I ask, could you speak a little louder? We can barely hear you.

Paola Carboni: Yeah, sure. Sure.

Paolo Marchesini: Thank you.

Paola Carboni: Sorry about that. Yes, hopefully you can hear me better now. Yes, my first question is about the sell-in, sell-out dynamics in Europe and Italy in particular in Q4. You know, what's the level of stock with the trade in Italy in particular, and how is the sell-out going? Secondly, I mean, a similar question in particular for the US market about aperitifs, if you can comment. I mean, I really appreciated the slide about Aperol penetration and opportunity. I was wondering if you can comment on most recent sell-out data for Aperol and what do you think in terms of price positioning for Aperol in the US?

Paola Carboni: Are you happy with the positioning of Aperol and occasion of consumption that Aperol has in the US? Further question still on the US market is about the considerable outperformance of RTDs we are seeing in the last few quarters overall at industry level. I was wondering whether you might consider, I mean, a more, let's say, a different approach, let's say, on RTDs in your portfolio in this respect for the US market and possibly, I mean, let's say, position your portfolio better to leverage on this trend if you think it's worthwhile or not. Thank you.

Paolo Marchesini: Okay. Into the 3 questions there. First one is sell in, sell out, in Europe. I mean, generally, as you saw in the chart that was in the presentation, we're in good shape in terms of the sell out data versus sell in, so we're not starting with heavy inventories anywhere. I think we're in a good position across all the markets in Europe. I haven't seen anything there that is concerning. In terms of the second question around the potential of Aperol in the US, as I said, we're interested in this. Again, we talk about back to Trevor's question around opportunities. When you realize that half of America has never heard of Aperol, it's certainly a good opportunity for us.

Paolo Marchesini: You then look at the distribution opportunities we have of getting Aperol into bars, there's a huge opportunity there. That leads into the fact that, not forgetting that while the sell out data, particularly in the first set that we've seen in this year, is negative in the off-premise, you gotta remember that 60% of Aperol sales are in the on-premise.

Simon Hunt: We continue to do very well, as I said earlier. I think ultimately on that, you know, the potential is there. From a pricing point of view, it comes down to end drink. That's really where the focus should be and how much an Aperol Spritz is in the on-premise. That's where we see huge variation across the US, given the states, given the pricing. At this stage, given the positive performance we're seeing in the on-premise, we don't see the pricing being a barrier to the opportunity for the brand going forward. I think that the last question just on ready-to-drinks. Yes, ready-to-drinks are doing well. The convenience play is interesting. It is driving a lot of the numbers at the moment.

Simon Hunt: I think, look, it's an area where, you know, Campari has an established history. You know, when you talk about ready-to-drink or ready-to-serve, you know, I think Campari, still learning this, so bear with me, but 1932 was our first ready-to-drink. I'm not sure how many other companies can actually say that with Campari Soda. So I think we have an area of expertise here. We understand the category quite well. You know, yes, there's an opportunity on our brands. Exactly what, where, how, we don't know yet. That's part of the process that we're working through in the House of Brands. We'll come back, closer to the summer with a bit more of an update around what opportunities we see in that space and what we think we can do given our fairly unique heritage in that space.

Operator: Ruth, thank you very much. For any further questions, please press star and one on your touchtone telephone. Gentlemen, there are no more questions registered at this time.

Operator: Hunt, thank you very much. For any further questions, please press star and one on your touchtone telephone. Gentlemen, there are no more questions registered at this time.

Simon Hunt: Okay, great. Thank you all very much for your time. I look forward to hopefully seeing you in person in the next few weeks or months. Thanks for your time.

Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.

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