Q1 2025 Davide Campari-Milano NV Earnings Call
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Speaker Change: Good evening. This is the Colours School Conference operator. Welcome and thank you for joining the Campari Group first quarter 2025 results conference call.
Speaker Change: As a reminder, O participants are in lease and only mode after the presentation that will be an opportunity to ask questions.
Speaker Change: Could anyone hear the assistance during the conference call? The may signal an operator by pressing star and zero on the telephone.
Speaker Change: At this time, I would like to turn the conference over to Mr. Simon Hunt CEO and Mr. Paolo Marcassini CF-00O, Campari, please go ahead.
Simon Hunt: Great, thank you very much. Good evening, good afternoon to everyone. Thank you for joining us on this call. My second one.
Speaker Change: where we're going to review our Q1 results and give our perspectives on the remainder of the year. As always, Palo is here with me and our IR team Kiar and Gulsa are happy to connect after the call to further deep dive with all of you in the upcoming days as necessary.
Speaker Change: So now a short summary of how we see the environments and our positioning. It's been quite an exciting 10 weeks since our last call.
Speaker Change: And to summarize our performance, I can say that we continue to record outperformance in sell-outs across most geographies with a strong bounce back in April in markets impacted by Easter timing has expected.
Speaker Change: This clearly shows the strength of our brands even in challenging times.
Speaker Change: On the financial performance, recognising in our smallest and lowest seasonality quarter, apart from the flag-east at timing impact, we also had three things. First, the additional negative impact of the macroeconomic volatility that affected ordering patterns.
Speaker Change: 2nd, some logistic delays on some of our March shipments of which several shipments went out in early April and finally the phasing of investment has previously guided on both A&P and S-GNA.
Speaker Change: and we'll dive more into the drivers of the top line on the next page.
Speaker Change: What is most important is that we're taking a prudent approach in this backdrop with focus on long-term brand building and tight management of what we can control. This means protecting the present and positioning effectively for the future.
Speaker Change: On costs, we're on track with our cost containment program to release the benefit starting in H2 has previously guided.
Speaker Change: Business investments in terms of AMP are continuing at the ramp-up from most important season.
Speaker Change: And on Capix, we're on track to complete our extraordinary program, primarily for production, capacity, expansion.
Speaker Change: At the same time balance sheet discipline is critical with ongoing management of deposition to get our leverage to normalize levels supported by no acquisitions and progress on portfolio streamlining.
Speaker Change: In terms of portfolio, we are focusing on geographic expansion of our brands to further increase how geographic diversification.
Speaker Change: and it will be done by utilizing our existing footprint following investments in the market, made over the last couple of years.
Speaker Change: In Q1, in fact, we recorded significant double-digit growth in more than 10 less developed markets globally.
Speaker Change: On the commercial front our key priority is to ensure the quality of our execution and maintaining our pricing discipline.
Speaker Change: So let's move to the next page, the deep dive, the net sales drivers for this quarter.
Speaker Change: We recorded negative 4.2% organic net sales growth, which equates to a decrease of 28 million euros in absolute terms.
Speaker Change: Of this 21 million is down to phasing of which 10 million is easter timing and 11 million is temporary logistic delays in the US in terms of replenishing our stocks.
Speaker Change: which will reverse in the remainder of the year and in fact a lot has already been recovered in April .
Speaker Change: As a result, we are seeing encouraging trends in April on our priority brands, despite the ongoing volatility.
Speaker Change: This means that the underlying performance of the business was closer to 1.1% or 7 million euros down. And this was driven by three things. First, slightly higher than expected impact on the new flow from the U.S.
Speaker Change: Second, a decrease in bulk sales activity in the UK, on bulk, despite its small size in our portfolio at 1% of total sales. The impact of this quarter was significant at 4 million
Speaker Change: So if you take this out, we're actually 3 million down on a full sales, on a full year of over 3 billion.
Speaker Change: And apart from these impacts, 70% of our portfolio covering the rest of the world continue to grow with a plus 1% overall.
Speaker Change: So now moving on to the all-important sell-out data. Now looking at the sell-out data as I mentioned how our performance continued across almost all markets especially with a strong bounce back in April in markets impacted by Easter timings as you will have seen.
Speaker Change: And we've been disciplined on our price mix, given the uncertain market backdrop. In the US, especially in the strategic on-premise, we continue to see solid trends driven by Apple and by S-Belong, at plus 12% and plus 14% respectively.
Thank you.
Speaker Change: In Europe , again, our performance is continuing with plus 1% growth versus negative 2 in the sector in Q1 and looking at especially at the year to date data as of April , which neutralizes the impact of Easter. There is a solid growth and a significant delta versus the sector.
Speaker Change: In Germany, we are plus 8 versus the sector of minus 1. In the UK, we are plus 13 versus the sector of minus 1.
Speaker Change: Italy where we have a large market share is trending almost in line with the sector but we are growing.
Speaker Change: and we've plus 4% on apparel and we have a strong focus on activations ahead of the peak season ongoing at the moment.
Speaker Change: with launch of new campaigns on apparel, credino and campari soda.
Speaker Change: A part of this page quickly is we've already comes on the overall trends in our net sales and we'll deep dive one by one into the regions and houses in the upcoming pages.
Speaker Change: But overall total set fails growth was 0.3% in Q1 with an organic change of negative 4.2 and organic Kager vs. 2019 of PLUS 9.
Speaker Change: On top of this, we record a perimeter impact at plus 4.3%, mainly driven by Colvose, and a minimal FX impact of plus 0.2%.
Speaker Change: Moving on to the Americas. The America's organic change was negative 6.
Speaker Change: In the US, without the logistics delays I've already mentioned, performance was minus 5. Apart from this there was the impact of a highly volatile operating environment which also led to further destocking in sky, Germany and World Turkey.
Speaker Change: The process was impacted by a tough comparison base and softness in the Blanco category trends.
Speaker Change: However, the underlying brand health remains solid. App all remain resilient, despite a high comparison base of plus 15% with a flat performance, but in sales out delivered nearly a 5% growth in the off premise and a plus 12% in the on premise.
Speaker Change: Jamaica recorded a plus 5% organic increase driven by Jamaican brands off a low base.
Speaker Change: Normalization of the local operating environment was supported following the impact of the hurricane last year.
Speaker Change: The Dunderwater Treatment Facility Development is on track and will make us more resilient to future potential climatic shocks.
Speaker Change: The rest of America's continued its solid performance in Q1 with plus 7% growth, excluding Brazil, mainly driven by apparel and sky.
Speaker Change: Brazil was impacted by a high-con base of plus 77% last year and if you look at the two-year SAG Brazil is growing plus 24.
Speaker Change: This continues to show that the potential of our brands is truly widespread across the Americans.
Speaker Change: Moving to the medium we recorded negative 4 organic change mainly due to the use of timing primarily in the core markets of Italy and Germany.
Speaker Change: Focusing in on Italy, net sales would have been flat, excluding the use to impact. Apparel grew, plus 2%, supported by dedicated activations.
Speaker Change: The Brown Health and Strength of the Portfolio remains strong, and looking at the sell-out for April , nine out of 12 amea markets recorded growth in this period, and four of them were delivering double-digit growth.
Speaker Change: Germany was also impacted by Eastern and would have been flat, excluding this impact, driven by the core operatives, despite a high comparison base of plus 25 percent last year.
Speaker Change: And in the UK, we had a technical impact on the decrease in bulk whiskey sales I just mentioned and excluding this growth.
Speaker Change: We would have delivered plus 10 percent, again, driven by the authorities.
Speaker Change: In the other countries in Amir, which contribute our 15% of our overall sales, we continue to show solid aperitif growth with plus 2% growth trade mainly driven by GTR and Greece.
Speaker Change: And this was offsetting Q1 by softer performances in South Africa on Biski Konyak and the Netherlands mainly due to a high base effect.
Speaker Change: Moving on to APEC, we saw solid growth of plus 11%, Australia grew plus 16%, driven by excellent execution in apparently during a peak season at the Australian Open with accelerated focus on on premise 360 degree activations, and we'll comment more on those activations in the upcoming pages.
Speaker Change: Also, Esplan and Esplan RCD are gaining traction and growing rapidly. In fact, it became the number one to kill already to drink in the country.
Speaker Change: In the rest of APAC growth was plus 4% with China contributing the most, benefiting from the prior route to market investment, as well as positive trends in South Korea.
Speaker Change: Now you know most of the businesses now moved to the House of Brands structure as of 2025 and as of Q1 we have now staffed all of the key positions within this bottle and are operating and reporting within this
Speaker Change: So starting with the House of Appurities we had resilient performance even with the east of timing resulting in a negative 1% change.
Speaker Change: Apparel remains flat, supported by solid plus 8% growth in the Americas, upset by the easter timing impact in a mere.
Speaker Change: The U.S. was flat as I said earlier despite the high comparison base of plus 15%, with a two-year stack of plus 7%, but positive sellout data has already commented on.
Speaker Change: The rest of Amir remained in the resilience, but plus 2% growth in Italy, despite Easter timing, and despite the high comparison base of plus 25% in Germany.
Speaker Change: For Campari, apart from the high-con base in Brazil, east of time in Italy and some softness in the US, the rest of Amir was positive at plus 8 percent, driven by the acceleration in the Campari Spritz trend.
Speaker Change: Cardino are not now continues to grow off a small base across Amir. Again, excluding the impact of Easter, it grew in Italy as well. And the rest of our parrots are growing nicely, supporting our leadership position in the aperitif category globally.
Speaker Change: In whiskey, the soft performance continued driven by a core U.S. offsetting solid growth in APAC, anemia of a small base. And Russell's reserve remains resilient in line with our premiumization strategy.
Speaker Change: Jamaican Rums grew across all core markets, off an easy comparison base on supply shortages last year, and here the underlying trends in Rums remain strong.
Speaker Change: In the House of the Garvey, S. Ploma is impacted by the decline in Blanco mainly due to our discipline in promo and pricing in an uncertain environment ahead of tariffs, as well as the logistic delays that I mentioned before.
Excluding logistic delays, Haslam would have been around negative 1%
Speaker Change: The reposado on the other hand continues to grow very nicely.
Speaker Change: and the insinization of the brand is gaining traction with a focused approach in key markets like GTR Australia and Canada.
Speaker Change: Within the House of Cognac and Champagne, Gromania again was impacted by the list of logistics delays as well as some of these stockings.
Speaker Change: We are also maintaining a tight focus on pricing to protect our brand equity in a highly competitive market.
Speaker Change: Good boys, as you know, is still in perimeter and will be included in our organic growth in May this year.
Speaker Change: We've started to build the brand strategy, especially in the U.S. and U.K. On hay patch, the definition of the plan is ongoing given the challenging backdrop.
Speaker Change: As I said before, this is an acquisition for the long term in a category that we believe in and while I would take time to turn around, we have strong experience in the team and the board and we are confident in its potential.
Speaker Change: For the rest I won't comment too much just to note the 22% of our overall portfolio is currently classified as local brands. Give them their geographic concentration.
Speaker Change: The main driver of the decline in other local brands was due to the reduction in non-core bulk and co-packing activities that I commented on before.
Speaker Change: and Sky remains an important part of our portfolio and there are some bright signs of growth in regions like the Americas and APAC.
Speaker Change: Now taking a step back from the court of results, we also want to share what is happening internally in this period. As you can imagine, it's been a very busy period where I've been out with the teams across all of our regions and across many of our production facilities.
Speaker Change: Let's think to our camperistas to better understand our brand and our business for the future.
Speaker Change: And this has been a truly inspiring period for me, where I was able to understand even more clearly the strong culture the dedication our teams have to the business and to the brands.
Speaker Change: And moving on to the next page, I'll give you an update on the strategic priorities we've been focusing on.
Firstly, on our strategy definition.
This period apart from traveling and meeting the teams.
Speaker Change: We've also been actively working on building our strategic road map ahead, recognizing that it's been a pretty bumpy start to the year for everyone with the elevated flow of news.
Speaker Change: And in this process our newly formed houses have been focusing on building our strategy in terms of consumers and brands, while the regions are focusing on the execution with our customers and our in-market activations.
Speaker Change: All of this is coming together to define our portfolio strategy and brand ambition for the long term with focus on a key brand market combinations.
Speaker Change: Once this is defined, it will allow us to more effectively decide on our investment needs and allocations.
Speaker Change: and this process is fully grounded in our areas of key competitive advantage.
Speaker Change: On cost containment we are progressing and on track to achieve our target of 50 bits benefit in sales in 2024 and 200 bits benefit by 2027 leading to operating leverage and a margin of creative profile in structure costs.
Speaker Change: In fact, we have already started more than 70% of the actions to achieve these goals with benefits to be visible from age 2 onwards, as previously guided.
Speaker Change: As you can see from this chart, the SGNA growth has already slowed as of Q1, despite the low base from last year, and this will progressively continue to benefit in the remainder of the year.
Speaker Change: On portfolio streamlining, we've already started to take some steps including the divestment of our local bottling plant in Australia with closing expected in mid-25.
Speaker Change: We're also taking steps to streamline our agency brand agreements and for the rest the process is ongoing.
Speaker Change: with timing of potential additional disposal to be determined based on optimization of potential proceeds.
But I can say that conversations are progressing.
Speaker Change: Now before I hand over to Paulo to get through the financial review, let's have a quick look at some of the activations.
For Apple, we had two major initiatives in Q1.
Speaker Change: The first was a large effort as part of our Australian Open Sponsorship and we executed 360 degree activations not only in and around the event but also across the city in many on and off premise locations.
In fact, you saw the results in our sales credit.
Speaker Change: In addition, the cocktail sold during the event increased plus 25% compared to last year and it became the most sold drink during the event.
Speaker Change: Going forward, the on-premise focus with Afro will of course continue in Australia.
Speaker Change: Secondly, we accelerated our de-seasonization efforts with our out-take-overs that I mentioned on our last call. And as part of this, we activated more than 100 on-premise accounts in 24 ski results.
Over more than half a million apparel spritz were sold.
Speaker Change: And the activation was enhanced with multiple weekend experiences for influences, journalists, and on-premise customers and further amplified by out of home and digital media reaching more than 8 million consumers.
Speaker Change: Again, as part of our DC's organization effort, we partner with the ICE events in Samarits, showcasing some of our brands like Apro, Campari and Lalle. The big interest in our brands is a clear indication that the Spritz trend works very effectively, both in the winter as well as in the summer.
Speaker Change: For Campari, the link with cinema continued to be enhanced with dedicated activations across multiple film-related events.
Speaker Change: Including the continuation of the Vananali partnership in Berlin, the Austin Film Festival in Belgium. In addition, we have the Saga Awards in LA for the fourth time as the official Spirits sponsor.
Speaker Change: They give you a flavor of some of the activation and now I'm going to hand it over to Paolo for the financial review. Paolo.
Paolo Marchesini: Thank you Simon. If you follow me page 19 we can see that the EBITA drafted in value declined by 17.2% organically with a margin delusion of 300 and 10 basis points.
Paolo Marchesini: cross-margin came in flat and was mainly driven by positive cox evolution from supporting [inaudible]
Paolo Marchesini: Another input cost and that was of side by negative mix due to lower share of the US profit with minimum contribution from pricing in the first quarter of this year.
Paolo Marchesini: At Polon Gross Margin is now a nearing group average gross margin in the first quarter.
Paolo Marchesini: Notwithstanding the phasing of the top line with negative 4.2.
Paolo Marchesini: 1% organic growth of net sales AMP has been stepped up in value by 2.4%.
Paolo Marchesini: who is a 90-base point modern-dedution effective effect mainly due to the accelerated on-premise activation for operatives, including dissonalization efforts in India.
Paolo Marchesini: and the investment to support the peak season in Australia. A MP2 sales came in at 13.8% versus 12.9% in 2024.
Paolo Marchesini: On a full year, we're still expected to have, you know, AMP as a percentage of net sales within the range of 17 to 17.5. So probably with a step up that is 50% of what we've seen in first half.
The SNA, you know, grew by 5.1% in value.
Paolo Marchesini: And, generally, they lose 100 business points as a percentage of sales.
Paolo Marchesini: And that was impacted by low-pays in Q1. We've seen before Q1, as you know, we're up in value by 4%.
Paolo Marchesini: Secondly, you know, the cat, the bigger carryover effect from 2.3 and 2.4 of last year.
When S-GNA grew in value by 11%
Paolo Marchesini: And thirdly, the muted top line with a negative 4.2% had any impact on the overall delusion in such a small quarter.
Simon Hunt: On the other end, as Simon has just said, the cost containment efforts are all on track, and they were expecting to deliver positive impact in the second half of this year.
Simon Hunt: Ibit adjusted on a reporting basis was then down by 10.2% with positive perimeter effect of 2.5% including the tail end effect of the first time consolidation of UVA.
Simon Hunt: The effects was positive by 4.6% primarily driven by the devaluation of the Mexican Paisers.
Simon Hunt: If we move on to the following slide, tiny operational adjustment of 7 million euros, primarily attributable to the impairment of assets in connection with the disposal of the Australian plant.
Simon Hunt: Total financial expenses can mean at 21.8 million euros including exchange gains of 3.4 million euros and financial expenses of 25.1 million euros aligned to the expected fully-arranged
Simon Hunt: Last year financial expenses were much lower, 12.1 million euros into one all of this year, but those you include at the benefit of interesting come on higher cost position ahead of the closing of the curvasio position, which according may.
Simon Hunt: The average cost of 90% in first quarter of 2025 is 4.2% versus 3.1% of last year.
Simon Hunt: But if we normalize, you know, last year coupon of the benefits on excess cash, which I've just, you know, mentioned last year coupon would have been 4.2%, therefore, you know, comparable and stable vis-a-vis, you know, this year.
Simon Hunt: Pritex Profit, Adjusted, Camineta 100 and 13.7 million euros down, Invalued by 22.4% and Pritex Profit reported Camineta 106.7 million euros.
Let's get to national deck, stood at the Tubiño for 160 million euros.
Simon Hunt: relatively stable, you know, up 80 million euros versus December and last year. Seed with a cash and cash equity balance accounting for 587 million euros down 80 million euros because they made you to cap its initiatives and other commitments.
Simon Hunt: Leverage ratio in a day to be done in a 3.4 times marginally higher is the December end 3.2 times but here you know clearly you know deal average will will materialize in the back end of the year
Simon Hunt: I think, you know, Simon, you see it on the numbers. Floor is yours for the outfit.
Simon Hunt: Okay, thanks, Paulo. So, as you know, the current macroeconomic environment is not like anything we've already seen before, and we have very low visibility, and it's still leading to economic pressure on consumers and uncertainty in the trade with connection
Speaker Change: In this backdrop, we remain prudent for the short-term with focus on what we can control, which namely is effective balance sheet and cost management and commercial execution plus pricing discipline.
Speaker Change: Now, focus is also on portfolio streamlining and just to reiterate, we do not foresee any acquisitions.
Speaker Change: For 2025, the guidance we previously provided remains out target, but we do recognize that the visibility is low in this environment.
Speaker Change: The negative impact from tariffs is not included in guidance and is expected to be around 25 million euros on EBIT in 2025, the four possible mitigation actions.
Speaker Change: Regarding effects, the weakening of the US dollar may pose some potential additional negative impacts for the remainder of the year, which we are monitoring.
Speaker Change: Regarding medium-long term outlook, we confirm our previous guidance, and we are confident for the future.
Speaker Change: As we mentioned before, we plan to come back to you with more details once we see a reduction in the volatility in the operating environment.
Simon Hunt: So that's it for me and Paolo and very happy to open up to questions.
Speaker Change: Thank you. This is the Coruscall Conference Operator. We will now begin the question and answer session.
Speaker Change: To remove yourself from the question, please press star N2. We kindly ask you to use the handset when asking questions.
Speaker Change: Anyone with a question may press star and one at this time.
Speaker Change: We will post for a moment as participants are joining the queue.
Speaker Change: First question is from Andrea Pistaki, Bank of America. Please go ahead.
Andrea Pistacchi: Thank you. Yes. Good afternoon, Simon and Tauro. I have three questions, please.
Andrea Pistacchi: The first one is just, Simon, if you could explain a bit more the situation of shipments to the US that you flagged and some companies have flagged the highest shipments to the US ahead of tariffs.
Andrea Pistacchi: that you're saying lower shipments in part because of the logistic delays in part because of distributors cautious attitude they probably don't
Andrea Pistacchi: I don't know how to how to think of the next few months so what is driving the logistics delays I think you you said you caught up in April and what
Andrea Pistacchi: Will shipments look like in Q2 versus this sell out? Will they expect a catch up at this point? Have you been able to ship enough stock into the US?
Andrea Pistacchi: to propose the 10% tariff on Europe , at least until the second half.
Andrea Pistacchi: The second question is on Europe , so you may have had a slow start, but a lot of this was explained by the calendar effects that you flagged April was strong, so how would you feel about the environment in Europe ?
Andrea Pistacchi: As we go into also very much from a distributor point of view how are they feeling you think as we start the key the peak season for aperitifs.
Andrea Pistacchi: and then for Paolo you've touched on some of the margin drivers Paolo. Can you just put it together give it an update on on the drivers of the margin outlook has anything changed versus two months ago in terms of
Andrea Pistacchi: of the moving parts. I think you told us flat-gross margin this year aiming for A&P, summary A&P reinvestment and as a positive the 50 basis point test G&A benefits. Thank you.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Great, Andrea. Thanks for the questions. I'll take a first and then apologize for the third one. Just on the first one on shipments in the U.S.
Speaker Change: The logistic challenges we had were a little bit a function of the fact that we're trying to move as quickly as we can in a fairly uncertain environment.
Speaker Change: So to be fair to the supply chain team we've been putting huge demands on to them to try and get things out the door as quickly as possible.
Speaker Change: We had four major areas that did impact that are included in the numbers. The first was a shipment of Gromaniade of France that delayed you to uncertainty on tariff paperwork.
Speaker Change: The second was on Esplan, which is a delay in pick-up that rolled into April . The third was a key ingredient for American honey, a supply we had a challenge with, and the fourth was availability of glass on sky.
Speaker Change: So all of them are very clear, and as a result it's quite comfortable saying that the underlying performance should really take those out.
Speaker Change: And when we look at the performance through April , we've seen a strong April across the board really compensating for what you see as the much weaker shipment pattern than we originally envisaged.
In terms of asking a question through shipments, we are to acute soon.
Speaker Change: We are still in quite an uncertain environment and so while we're working with the teams that make confident on our plans and what we've got planned in the market
Speaker Change: As you see even what the announcement an hour ago is now changing some other views on what's happening with the tariffs and the macroeconomic environment.
Speaker Change: So I think the trade still remained cautious in terms of your specific question on the stock going into a wholesale network. We're holding days at this stage. Some of our competitors I know have been building more stock. We've been holding it. And certainly on it will continue to monitor it and respond accordingly.
Speaker Change: I'm hoping what the good news is for Easter next year, I think I won't have to repeat it so many times as we go through what's going on with the numbers. But in terms of the overall performance.
Speaker Change: When you take that out, we've got some great sell-out performance across the number of the markets, including in a very important market in Italy, where we see positive trends coming through, not only in terms of shipments on Apple, but also on sell-out.
which is encouraging.
Speaker Change: The data we've seen through April , I think is given generally, I'd say the market in Europe a little more optimism, that we're starting to see consumers coming back into the category. It's still very challenging, that is want to be clear, but ultimately on this, more positivity than we've seen in the past three or four months, which is encouraging.
Speaker Change: For us, it's a key season. We have the biggest plans we've done. We have the biggest push that we've done in terms of making sure we were executed brilliantly over the key season. And so we're monitoring it very closely.
Speaker Change: I think for the third question, Paula, prospect you for the margins.
Paul: Yeah, we did the matching and the guidance we gave is fully confirmed. So basically, the level of gross margin, we confirmed the fact that if you look at the cocks, once we strip out the effect of volume and mix.
Paul: and price should actually be positive because we still have a little bit of tailwinds on cost of Agave particularly.
Paul: On the other end, you know, clearly the stage mixer will be crucial in Q2, Q3, and now we have the big seasoner for the Apparites.
Paul: on the pricing front so you know mixer is I would say you know the question mark at this stage why it's pricing you know we will still have you know minimal contribution this year differently from you know the you know the post pandemic you know ears.
Paul: So, you're resolved, but you know, on cox, you know, we on cost of goods sold as a percentage of sales, we're in a good spot.
Paul: On the A&P, as you correctly pointed out, we tend to step up the A&P spend and
Paul: and and found this you know via you know containment of of the asian is a percentage of revenue by history basis point in year one of the three of plan
Paul: which is aimed at achieving the 200-busys point as G&A is a percentage of revenues compression.
Paul: The point is that it will be managing the phasing. We've seen that the Saturday has been a little bit impacted in terms of shipment phasing due to easter logistics and to other things.
Thank you.
Paul: and that you know as you know clearly had an impact on in this margin but you know if you look at you know what is to come.
Paul: Now, on the M.P. Spent, we are leaving Q2 and Q3 will be a heavy.
Paul: So you know we intend to exploit you know as much as we can at the aperitif big season and that is clearly you know an adverse elemental vis-a-vis you know a bit much in trends.
Paul: We've seen in Q1, as you have been up by 5.1 percent, we're still believing in Q2, you know, in value. You know, the SNA will increase. So, you know, in H1 we will have, you know, a value increase of SNA.
Paul: But thereafter, in Q2 and Q3, we will go in negative territory with a value and of course this is a percentage of revenues.
Paul: So you know if you combine, you know, the whole thing, you know, jelly, you know, the first half of the year.
Paul: We will add you know negative impact at the build level and we will add you know recovering in second half of the year. But you know, but the overall it's more you know managing the failing of expectations than the political results at the stage.
Got it. Thank you very much.
Next question is from Sanjeet, Aweela, UBS. Please go ahead.
Sanjit Awila: Hi Simon, Paola, a couple of me please. Firstly, can you just talk a little bit more about the pricing environment and some of your categories in the US in particular to Keyler?
U.S. Whiskey
Is it fair to say...
You're holding the line on pricing and that is driving.
Inventor market share headwinds in those categories for you.
Sanjit Awila: and secondly just some of the new back to Europe . Can you just give us a feel of how the retail and negotiations have gone through the quarter? Have they all been?
Sanjit Awila: concluded now, or is there still anything significant outlying that? And therefore how are you feeling getting pricing for my environment in the future?
Speaker Change: Sanjeet, yeah, absolutely. I mean, does the pricing, the two categories you're talking about, I mean, I think you're going to recognize that there's a pretty competitive environment out there. And so within to Keira at the moment, you're seeing a lot of trading down from super premium into premium where we're playing, which is a good opportunity for us, but it's also making it pretty, pretty competitive. [inaudible]
Speaker Change: I think the comment I made in the kind of prepared remarks is very much within the blank in Cured Category.
Speaker Change: We are seeing more price competition, and at this stage, given the uncertainty on tariffs and the impact on retail pricing, we are holding and not promoting and pushing as much as other people.
Speaker Change: So that's a conscious choice because we want to see how this plays out.
Speaker Change: In Reposado, as well given the growth we're seeing, you know, we've seen what 27% growth in the category. We're trending well in Nielstowning, we're plus 17, 18%. As a result, we don't see the need to start competing on place in that space.
Speaker Change: So I think there's still a lot of uncertainty even with a bit more of the confirmation post kind of the view on Paris, but it's still highly competitive out there.
The second one on U.S.W.S. Gees, again, weep.
Speaker Change: I think we need to be responsible and looking at pricing in the long term. It takes an awful lot of time to get these prices to where they are and as a result, we want to be disciplined in terms of making sure that when we are promoting, we are getting the right lift on that promotion and not eroding the brand equity that's been built over many years. Again, highly competitive cascading, the moment we'll continue to see how that progresses.
Speaker Change: I think in terms of the second question on European negotiations with the alliances. We are done with all the major ones. I think we still have one smaller one still outstanding, but the conversations are progressing well.
Thank you very much [inaudible]
Speaker Change: Next question is from meachcollet.bank. Please go ahead.
Mitch Collette: Hi, Simon. Hi, Paolo. Just one question please. It's great to have the clarity on the impact of tariffs, so thank you for that. Just to be clear, is that an annualised impact?
Mitch Collette: Can you confirm the tariff rates you've assumed on key geographies to get to that number? And what would be really helpful is could you give us some color on what sort of level of mitigation is feasible?
Thank you
Speaker Change: Yeah, absolutely. I mean, look, in terms of the 25, we've assumed at this stage that the European brand so it's sought out of Italy in France or at a 20% tariff.
Speaker Change: And we've assumed that the 10% tariff out of Jamaica, so that is the kind of the structure we've looked at. As you know, it's a dynamic environment and is changing daily.
Speaker Change: So ultimately on this we're very comfortable in terms of navigating this going forward. The team might have been through this several times before. The key thing is we just need to know what they are and then we can plan around it.
Speaker Change: In terms of the 25, we're assuming about 10 is going through from Italy, 10 from France and 5 from Jamaica, so give you a bit of an idea of the split.
Speaker Change: And for 2025 it's not annualised, that's for the balance of year. And as a result we need to see what happens as the next couple of months with the various trade deals that are being discussed. And we can then look at what the impact may be in 2026.
Speaker Change: And in terms of mitigation, there are a number of routes we can go down. For me, the whole question around pricing comes in to do pass it on or do not. Ultimately on this, we need to see what the competition is doing as pricing is relative.
Speaker Change: So being transparent with you, we'll be passing on to the consumers where we've calculated what the on-shelf impact would be and the price elasticity potentially that it could have, but that also depends what our competitors do.
Speaker Change: The second part is now we hold pricing and we decide that we're going to go after more market share in the category. So this stage we're going to see how things progress but we've worked out a bunch of different scenarios based on where we end up on the actual percentage.
Speaker Change: Very helpful, thank you, just to make sure I've understood you correctly to get from the 25 to a full year impact, is it you looking at sort of...
of 912, so is that sort of seven months in Paris?
How do we get it to a full 12 months?
Speaker Change: We're assuming we'll be from April 8th going forward. So there's some mitigation stock we already have in market and we've got our best estimate at this stage. But as we said, it is a bit of a moving feast at the moment. So hopefully that explains.
Yeah, got it. Thank you.
Next question is from Simon Hale, CT, please go ahead.
Speaker Change: Thank you, Ednigall. So, a couple for me, please, Simon and Paolo.
Simon Hills: Firstly, can I just confirm on the logistical delays that you had in Q1 that we should expect to see the full recovery of that in Q2 or could some of it slip into sort of the second in half of the year?
Simon Hills: Secondly, just on the overall outlook for the remainder of the years, you've maintained the full year guidance you set back at the key four stage, but you've clearly flagged.
Simon Hills: your hands around some of the controllables in the business particularly on the cross side that that still means that you're very comfortable in hitting the profit numbers that you thought you might be able to never back when you set that guy into the Q4.
Simon Hills: And then, thirdly and finally, obviously a very strong performance in Asia in Q1. You talked about some of the drivers of that. How do we think about the sustainability of that sort of growth rates as we move into Q2 and beyond they appreciate. We're coming out of the summer months in Australia, etc.
Simon Hills: Hi Simon, yeah I think in terms of the logistical delays I think we've already picked up quite a lot of those just coming to literally it's just what what what's recognized in March as opposed to ship in April .
Simon Hills: For the one that we have in our interest pay, we should have had a fully recovered through Q2 and I don't anticipate that they're going beyond that. That's the first one.
Simon Hills: and a sick one in terms of more cautious the year or more optimistic.
Simon Hills: I think your crystal ball is as good as mine if I'm totally honest with you we're dealing an environment that no one has really seen and so what we are looking at is a balance of the guidance we've already given and our ability to manage both the risks and the opportunities that we see in the business.
So I would say our guidance stays as is.
Speaker Change: Not a little more cautious and a little more optimistic. I think it's just a case of recognizing the fact that it is a challenging environment. And then we need to focus on the execution and maintaining the pricing discipline that we show and so far. So that's more where my kind of view into the holding it and when Palo and I are looking at it the same way that's where we think we can manage through the balance of the year. So that's more where we are. So that's more where we think we can manage through the balance of the year.
And so do you have a third question on APAC?
Speaker Change: As you know, NAPO made quite a few changes last year in terms of route to market and teams and various other things.
Speaker Change: APAC, the performance in Q1, was led by a really positive performance in Australia, plus 16%.
Speaker Change: Our shift to a more on-premise-focused model is starting to really start to build the acceleration that we have in that market.
Speaker Change: Outside of that what's encouraging is we're seeing some very good performance in some of the smaller markets as well.
Speaker Change: So at this stage we saw strong performance in China. We're seeing some excellent execution on apparel in Thailand, in the Philippines, in Singapore, in Indonesia.
So, I think we're starting to see a more
Speaker Change: a predictable base and building the brands up in the way that got in campari does better than anyone else.
Thank you very much.
Next question is from Richard Fritte-Gene, Kepler. Please go ahead.
Speaker Change: And then the slightly longer term question also on strategy. As you refine the strategy and get clear about strategy execution, you know, what capabilities and investments I needed for the business in the longer term? Is that more supply chain, more marketing technology?
Speaker Change: The folks on execution at the moment is all of the above in the environment which means we need to be as efficient as we can in the operations area.
Speaker Change: We need to, from the commercial side, making sure that we are executing brilliantly at the point our consumers are looking for our brands in both the on and the off-premise and for a marketing point of view we've got to make sure that we're creating that desire at the key moments where consumers are looking for one of our brands.
Speaker Change: So, it's across all of them and what we're really putting through there is making sure that we're committing to doing something that we're doing it as efficiently as we can. So, the focus on execution is really across the board. The balance of how do we make sure that we're delivering a top line growth for execution, but also managing the cost containment that we've already flagged as well. [inaudible]
Speaker Change: I think the second part is that looking at a strategy going forward ultimately on this strategy drives the structure and drives the capabilities that we need. We're busy in that at the moment working through over the House of Brands.
Speaker Change: and what we think we can do with the portfolio and then seeing what the implications are for how we want to take the business forward.
Speaker Change: Clearly, at this stage, I think it would be too early to comment on where we see, but a couple of comments just on your question. We're in a great position, the extraordinary CAPEX program that has already been put in place.
Speaker Change: means that we have the capacity in our production units to be able to cope with an accelerated growth so we would not have to put in an exceptional capex program to meet that capacity we're already there which is great.
Speaker Change: The second thing is the team and Palo have invested aggressively in our IT infrastructure. We have a great systems platform that I think we can do a lot with going forward, which would be incremental versus a sub-to-nuts rebuild of an IT system. So, certainly on those two key enablers.
Speaker Change: We're in a position where the previous team is invested wisely and carefully so we're in a position that we can take advantage of that.
Speaker Change: When it gets A&P and the market combination being very simple on this it depends what we want to do and so we need to work through that and once we've done that we'll be much clear around what we think is the requirements for A&P to execute the strategy that we now want to pursue.
Thanks, Simon.
Next question is from Trevor Sterling, Bernstein. Please go ahead.
Speaker Change: Hi, Simon and Paolo. Those are just two broad questions. The first one...
Speaker Change: You know, when you look at some of those numbers, it's pretty sobering reading, apparel, flat, festival, on darn five, Campari-Darn five, and even if you're just for the technical underlying growth of line S1, it's not, don't just set you on fire to say the least.
Speaker Change: and for three quarters we've been encouraged to look at the sell-out data which looks much better than the sell-in data and here we are on the third quarter. So you sound much more confident than those numbers look.
Speaker Change: So what gives you that confidence that we're going to see a recovery?
Um.
Speaker Change: And the second question for Paolo, you're 200 bits of growth, Paolo, over the three-year period. What level of underlying growth do you need to make that? Because I'm sure you've got some operating leverage on all the investments is built into that 200. So what level of growth do you need to hit in order to deliver that 200?
Speaker Change: Hi, I mean, yeah, look, good questions. I mean, in terms of the performance through Q1, yes, I recognise where we are in terms of the numbers. But I think the key thing to me is we've got to focus on sell-outs. And we've got to make sure that is where we build the long-term health of the business.
Speaker Change: and against the sellout trends, I recognize the sell-in, not a great story on sellout. If you see we are out performing the market, in most of the markets we are competing in.
Speaker Change: So even in the US we're only plus five in the off-premise in a market that's found free.
Speaker Change: In Germany, the market's down one, where plus eights in the UK, where plus 13. So I think there's an element of our shipments versus our sell-out and the coordination on that. And so that's probably what's driving a bit more of my confidence.
Speaker Change: That ultimately the success of the business is driven by sell out, not by sell-in.
Speaker Change: It's only one thing. I think the second thing is that the more I get into the business, the more I see the opportunities that the team are going after.
Speaker Change: and in terms of managing the business and whether that be the distribution target that putting in the quality of the programming that we put into the market.
or the focus on execution.
Speaker Change: It doesn't mean it's going to be an easy, easy sale by any stretch, but I feel more confident that we are very clear as to where we are going to find the growth even in the tough market.
Speaker Change: I think, you know, the, you know, our ability to recalcide of, you know,
Paolo Marchesini: positive states mix that is clearly a different story. If we manage to deliver the organic growth it is, you know, embedded in our need to long-term outlook.
Paolo Marchesini: We would absorb the 200 basis points short for vis-a-vis, you know, Bripandemis, so the me-to-eye single digit is what we're looking for.
Paolo Marchesini: You know, clearly any acceleration of a parity portfolio would clearly help us feed the campers sooner than that.
Thank you very much, Paula.
Next question is from Chris Picture, Redburn. Please go ahead.
Speaker Change: Yeah, good evening, Paul. A couple of questions from me. I'm firstly on the the SGA savings. Are you giving your comments around Asia and the strength in some of the smaller markets there? And obviously the importance of the U.S. is it fair to assume that
Speaker Change: The bulk of those savings will be coming out of EMEA and if anything you'll be looking to invest.
in sales and distribution strength across Asia.
Speaker Change: And then secondly on the UK there's a lot going on in the UK at the moment. You had a depressed year last year because of supply constraints from Jamaica but it turns out that there looks like there was some quite a decent amount of bulk sales. Can you can you give us an idea of what those bulk sales were in the UK and was it just.
Speaker Change: limited to the first quarter. And then finally, maybe one quick question. The Corvazier contribution looks to be a bit better than expected. Is that underlying performance, or was there a bit of sales contribution from shipments ahead of Paris? Sorry, it was three-year-old until, thanks.
Speaker Change: Hi there, Chris. Yeah, look, I've been in terms of the SGNA. I don't think it's so much around the different regions, ultimately on this.
Speaker Change: What we're trying to find is the right balance between the organisation on design and what we're trying to achieve. And so that's what we've been working through. Again, this is a mouth before I got here, but the execution that we're going through is really focusing on that across all levels of the organisation. It's not in one particular region to fund something in one of the others. And so that's what we're trying to do.
Speaker Change: It's also looking where we're resolved from a local region and global basis and it's across all functions.
Speaker Change: So it's one to question it's not about managing the SCA to try to expand in Asia.
We already have a pretty good footprint in Asia.
Speaker Change: and we also have a partnership model which allows us to then build the brands in those markets. At the point they reach critical scale that we want to build our own facility or our own capability. We can review that then but I don't anticipate a significant shift in terms of SNA between different regions of this stage.
Speaker Change: You are right and the current environment particularly focusing on the front end of the business and making sure you're executing brilliantly has been a big part of the focus.
Speaker Change: I think the second question in terms of the UK, there's a few things going on there.
Speaker Change: You know, we're cycling off the supply challenges from last year on the box sales. Actually, I think this was a Don't know the detail brilliantly on this one, but it was a contract with my with my old company, Willing Grant and I think Selco To buy bulk whiskey from Glenn Grant
Speaker Change: and that I don't think will be repeated and I think there's more timey issues than on going impact each quarter.
Speaker Change: So I think we have a first to emote the first one is the first one.
Speaker Change: It was just on Corvazier. It came in a bit better than expected. Is that the brand? There's some phasing issues there.
Speaker Change: I think, look, as we start picking up the brand, we're finding some opportunities that given the new ownership in the UK and the US we're going after, I think...
Speaker Change: It is a very tough category in the US as you know. It's turning what down 14.7 at the moment. The brand is holding its own there, but certainly the excitement just hasn't been in the UK for the last week. For the brand and the plans that we've got was very tangible. I think we're seeing a bit more enthusiasm around the potential.
Thanks.
Next question is from Edward Mondi Jeffries. Please go ahead.
Edward Mundy: Evening Simon, Evening Paolo. So a couple for me please, the first is a platform for Paolo, just on currency. Obviously the Euro has been quite strong versus the dollar, or certainly the dollar has been quite weak versus the Euro. You're able to share what your expectation is on translation and possibly transaction for the balance of this year for the currency standpoint that ebit.
Edward Mundy: The second is on the sort of US consumer environment and I think some of you are sort of alluding to some bumpiness and low visibility which I think is more on the US inner side of things. Could you perhaps share with us?
in a how well penetrated small pack.
Edward Mundy: IE-375 and below is, amongst your portfolio, I know you can get app role in 375 but perhaps a little bit of colour on the 375 and below opportunity for your business within the US. And then, third of all, ESPLON RTD which I think is more Australian candidate at the stage is just something you might go into with the US or is that RTD market a little bit competitive at the stage to think about launching ESPLON RTD there.
[inaudible]
Okay, Polly, onto the first-on-councy.
Speaker Change: in the U.S. from Pesos, the region of creating, you know...
Edward Mundy: on one hand you know positive impact on on the piano on the other hand is
Edward Mundy: having us, you know, feel the gap in terms of growth smart, you know, on a spot on visually average, you know, for the full year, you know, we're expecting, you know, bottom line positive contribution of, you know, flight is on top line on effects and positive contribution bottom line.
Edward Mundy: a low-single digit percentage on effects. Clearly, most recently, the US dollar has deteriorated versus the euro, and therefore it's a contribution for the remainder of the year will be less evidence.
Speaker Change: Okay and then the two questions on the US consumer on the small pack one I think ultimately on this the team's focus at this stage
Speaker Change: on driving the availability of our main brand sizes. It doesn't represent a big part of our business at this stage.
Speaker Change: I know in a more challenging economic environment, quite often you see a trade down the sizes and some other people are talking about the opportunities there. We do see some opportunity but it's not quite as pronounced for the brands that we have at the stage of development of something like apparel where again half of America is still not even heard of this brand so we do offer in a 375 would be a bit early.
Speaker Change: The team's focused on driving the availability of that. We'll continue to review the pack size opportunities down, but it's not something we're racing to at this stage.
Speaker Change: The second question on the success of S-Blon in Australia. It's really early days. Australia is a very competitive market as well, but it's exciting to see for us to take a leadership position in such a short time, really shows the quality of the appeal of the branding and also the liquid.
Speaker Change: I think looking at the US market of RCDs, it's got very crowded very quickly. If we were to enter it we'd really think hard about how we want to do it to ensure that we're successful and be able to replicate some of the early winds we're seeing in Australia. So I mean we'll continue to learn at this stage and then review the opportunity going forward.
Okay, thank you.
Speaker Change: Next question is from Sillin Panoti J.P. Morgan. Please go ahead.
Céline Panotti: Thank you. Good evening. I just have one question given what you said in April . Is it possible for you to give us a year-to-date growth?
Céline Panotti: trying to understand how much of a bounce back you see in April or in other world I mean do you expect Q2 to be positive given as well you have quite a tough comp from last year thank you
Céline Panotti: Yeah, we're not going to give you today's growth today. I think in terms of Q2 pillars already kind of given some indication on that that we are looking at positive growth for Q2, but yeah, we're not giving a year today growth at this stage.
Thank you.
Céline Panotti: For any further questions, please press star and one on your telephone.
Benjamin, there are no more questions registered at this time.
Céline Panotti: Okay, great. Well, listen, thank you everyone for joining us. If there are any other questions, certainly we're very happy to follow up with those afterwards. We can see Akiarra or Paola myself directly. Let us know and I'll talk to you in 12 weeks time. Thanks very much. Bye-bye.
Céline Panotti: Ladies and gentlemen, thank you for joining the conference now over. You may disconnect your telephones.
Speaker Change: This is a whole lot of girls up in here but I can't nobody would mind