Q3 2025 Davide Campari-Milano NV Earnings Call
Speaker #3: Hey , girl , I promise you ain't had it like this . There's a whole lot of girls up in here , but ain't nobody fuck with my .
Speaker #3: My favorite hobby is probably getting rich. I see them hard, but they hardly on. There's a whole lot of girls up in here, but ain't nobody with my.
Speaker #3: He only does it for you sometimes. Said he got a whip, but he got no drive. Said he got it.
Speaker #3: Don't shine and she love me . Cause I hit it to the sun . Rise . No , don't even gotta try it lately , baby I been thinking about you .
Speaker #3: And I bet your boy two friends and they both fine . Every . You ain't gotta worry , baby , you're mine I drank and she drank I all .
Speaker #3: Hey girl, I promise you ain't had it like this. There's a whole lot of girls up in here, but ain't nobody fuck with my.
Speaker #3: My favorite hobby is probably getting rich. I see them talk, but they hardly own. There's a whole lot of girls up in here, but can't nobody with my day still.
Speaker #3: And I know you're out with friends, but I promise, baby, I ain't changed. I ain't seen you in so long. That's worth every minute. I'll take you shopping.
Speaker #3: I'ma spend it on you. Just for love, I know you told me that you're scared. That I'm gonna switch it up.
Speaker #3: Cause two friends and they both fine . It's young , gotta worry baby , you're mine I dry hand , she drink and hey girl , I promise you ain't had it like this .
Speaker #3: There's a whole lot of girls up in here, but ain't nobody with my favorite hobby.
Speaker #1: Good evening . This is , of course , called conference operator . Welcome . And thank you for joining the Campari Group . Nine month 2025 financial results conference call .
Speaker #1: 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.
Speaker #1: They may signal an operator by pressing Star and Zero on their telephone. At this time, I would like to turn the conference over to Simon Hunt, Chief Executive Officer, and Paolo Marchesini, Chief Financial and Operating Officer of Campari.
Speaker #1: Please go ahead, gentlemen.
Speaker #5: Fantastic . Thank you very much . Good evening . Good afternoon to everyone . Thank you for joining us to go through our 2025 nine month results .
Speaker #5: And perspectives for the remainder of the year. Paolo is here with me; our team, Chiara, and I are happy to connect after the call to further deep dive with all of you in the upcoming days.
Speaker #5: As necessary . Now , just before I get going , as I think all of you already know , this is going to be Paolo's last call with us before he transitions to his new role as vice chairman .
Speaker #5: I’d like to thank him for all of his support, his long-standing contribution to this group, and I look forward to continuing to work with him in his new role.
Speaker #5: And it's pretty rare these days . You have a CFO that has presided over more than 100 earnings calls and holds the title of being the longest serving CFO in the Italian stock exchange , and certainly across our industry by a long , long way .
Speaker #5: That is an amazing track record and an achievement . And on behalf of everyone in the company , me , my predecessors and all of you here on the call and in our investment community , I'd like to say a big thank you .
Speaker #5: And for those of you who are joining us on the Strategy Day on the 6th and 7th of November, you have a chance to celebrate together with Paolo.
Speaker #5: Thank you again , Paolo . Welcome . Now , a short summary of our results . As you can see , our performance is on track with what we told you last time .
Speaker #5: Clearly , the operating environment remains challenging . Despite this , we are continuing to outperform the industry in sell out . And this is exactly our aim .
Speaker #5: We're keeping our strong focus on commercial execution and continuing to invest behind our brands to ensure we are well positioned for when the market normalizes.
Speaker #5: In terms of profitability, we're making strong progress, and this is supported by gross margin accretion and visible savings in SG&A, more than offsetting the ongoing A&P investments.
Speaker #5: As I mentioned, we are maintaining our guidance of moderate organic growth on the top line while on EBIT adjusted margin. We continue to expect a flattish organic trend as a percentage of net sales.
Speaker #5: But now, with the tariffs' impact incorporated, and we'll dive into the details later on, we continue to make solid progress across all of our strategic priorities in line with our expectations.
Speaker #5: As highlighted in previous updates, our focus remains firmly on the areas we can control, and we are consistently advancing towards our goals on brand-building investments.
Speaker #5: As already shared, we're not making any compromises on SG&A, as we have already guided that the deceleration trend is evident. We're also making progress on COGS efficiency on CapEx.
Speaker #5: We are on track to complete our extraordinary program for production capacity expansion in terms of portfolio streamlining , the disposal of our 50% investment in Tannico in Q3 is another step towards simplification following the disposals of Cinzano and the Australian plant in the first half of the year , and we are maintaining our pause on M&A on the balance sheet , our disciplined approach means that we have now been able to reduce our financial leverage in terms of net debt to EBITDA ratio by 0.7 times in the last 12 months , down to 2.9 times , with further improvements to come .
Speaker #5: Our portfolio approach continues to bear fruit. While we will discuss this more during our Strategy Day, I can say that we keep growing across geographies where we are continuing to gain share and prioritizing execution and pricing discipline in a challenging backdrop.
Speaker #5: Now let's look at our top line performance and the drivers . In Q3 , we recorded growth across all regions . Say that again , we recorded growth across all regions and delivered a very resilient 4.4% organic growth overall .
Speaker #5: And this means that as of nine months, our organic growth was plus 1.5%, in line with our guidance. And yes, we are still growing, even in this tough market.
Speaker #5: The peak season started positively in terms of weather , but we did see some variation across geographies in the latter part of the quarter , plus the impact of economic pressures on consumers played a role , especially in the on premise and in the US .
Speaker #5: But despite this , we recorded solid growth regarding some of the technical impacts coming from the first half of the year . You'll remember that of the 11 million US logistics delay impact , we flagged in Q1 , most of that has now been recovered with a limited impact expected in the fourth quarter .
Speaker #5: The delisting we flagged in Q2 in Germany continues to impact, with €3 million in Q3, leading to a total of €8 million in the nine months and an expectation to reach €11 million by the end of the year.
Speaker #5: Net, net, these two impacts balance each other out in the quarter and over the nine months. The underlying performance broadly matches our reported organic growth.
Speaker #5: The perimeter impact is plus 1.1% on our top line , while the FX impact was negative 2.4 , mainly driven by the US dollar devaluation and Latin American currencies , overall , our total reported top line growth is 0.2% .
Speaker #5: Now , looking at the sell out data , which is ultimately the main focus , our outperformance continued across almost all markets in a challenging backdrop , with overall shipments and sell out pretty much aligned across the US and EMEA .
Speaker #5: In the US , our outperformance in the strategic on premise channel and in Nebka is ongoing in Q3 , with plus 5% growth year to date in the on premise indicating a four percentage point beat compared to the sector and a two percentage point beat in Navka .
Speaker #5: And this is driven by very resilient growth of 12% and plus 9% , respectively , in our tequila and aperitif portfolio . Note that due to some data quality issues from the provider last night , we're only able to show a 52 week trend in the on premise data , not the usual quarterly performance , but I'm sure that data will be corrected soon .
Speaker #5: On the off premise . While our focus brands continue to show a resilient performance , the rest of our portfolio , which has a higher weight in this channel , impacted our total growth .
Speaker #5: And by the way, we should highlight that, given its universe composition, Nielsen off-premise doesn't sufficiently represent a full picture of Campari Americas' performance or momentum in the market.
Speaker #5: As we continue to make good progress across the club channel Inemia, we also outperformed in each of our main markets with growth of +2% versus a market of -2% in the region.
Speaker #5: Despite the pressurized context . Now let's look at our top line growth by region , starting first with the Americas and Americas grew by 1% in the nine months with acceleration in Q3 of plus 5% , driven by positive top line across the region .
Speaker #5: In the US , the nine month performance was impacted by the destocking in Q1 , while the last two quarters have both been positive , with plus 3% and plus 1% growth respectively .
Speaker #5: In Q2 and Q3, the main drivers are Espolon, Courvoisier, and Wray and Nephew, while the aperitifs recorded a stable trend with a positive Campari offsetting inventory reduction.
Speaker #5: Post tariff volatility . In April . In the third quarter , in line with the category trends , we continue to see persisting challenges on Sky Jamaica recorded , plus 11% growth in the nine months , with a very strong quarter three due to the base effect of last year's hurricane , but also benefiting from a very positive local market dynamics .
Speaker #5: And given the news at this stage , I think it's important just to update you with what we know about Jamaica . So at this stage , the team are evaluating the impact of the hurricane from last night and our primary focus is the safety and well-being of our teams , which we are confirming diligently given the lack of communication available .
Speaker #5: After that, we have teams on the ground at each of our sites to assess the impacts and next steps to get us up and running as quickly as we can.
Speaker #5: Recognizing the infrastructure damages anticipated by the Jamaican government, once we have clarity on the situation, we'll then be able to confirm our support for what those recovery plans are and can provide more of an update once we receive it.
Speaker #5: In terms of the rest of the Americas , which makes up about 11% of our group sales , it continued its solid performance with plus 3% growth in the nine months , and quarter three was flat , impacted by trade disruption in Canada in connection with the tariffs .
Speaker #5: But on the positive side, Campari has now become the second-largest premium spirits player in Brazil, driven by the strong performance of Campari and leading Brazilian brands.
Speaker #5: Now moving on to EMEA , the plus 2% growth was broad based across almost all countries . In Italy , the environment remains challenging , especially in the on premise .
Speaker #5: We saw less willingness by consumers to spend and decreased numbers of visits regarding tourism traffic. Even though accommodation occupancy rates were relatively solid during the summer, consumers were more selective about spending.
Speaker #5: They were also fewer Italians taking holidays during August, pressured by increased prices. In August, we saw all main beverage categories.
Speaker #5: That's all beverage categories , down 10% , including water , a mainstay of Italian consumption in both the on and the in the in and out of home .
Speaker #5: Really reflecting the economic pressures that consumers are seeing . And all of this played a role in the performance of Aperol . At the same time , we see our portfolio approach in a priorities bearing fruit , especially with solid trends in Campari , Codino Sarti was as well as the spirits portfolio in Germany .
Speaker #5: The environment has become more challenging over the last few months across all categories and sectors. As I think you know, consumer propensity to save versus spend has increased significantly.
Speaker #5: And we are still cycling the impact of the delisting at a retailer to hold our line on pricing . Despite this , we recorded positive top line growth in Q3 , mainly driven by the success of Sarti Rosa , which now accounts for more than 10% of our net sales and has become the second largest brand for Campari Group in Germany after Aperol .
Speaker #5: Again here, the benefit of our portfolio approach and spirits leadership is evident in France. Our solid performance is mainly driven by April, with plus 6% growth in Q3 and the UK.
Speaker #5: Performance remains strong , supported by our excellent execution during the peak season , with the added benefit of some good weather to the main drivers of the plus 22% growth in Q3 were Aperol and Aperol Spritz , as well as Courvoisier benefiting from the ongoing marketing campaign in the other countries in EMEA , which contribute 16% to our overall sales .
Speaker #5: We had a positive trend in all countries in the first nine months, especially in GTR, Greece, and Belgium. The bulk of the growth is coming from aperitifs and Courvoisier.
Speaker #5: Now moving on to APAC , growth was plus 5% in the nine months . In Australia , the growth of plus 6% in the nine months was driven by 15% growth in Aperol , with ongoing focus on accelerating the on premise activations as well as a plus 12% growth on Espolon bottle and ready to drink , which keeps leading the tequila ready to drinks in quarter three , which in any case is an off season quarter for Australia .
Speaker #5: Performance was impacted by the phasing of shipments in Wild Turkey, leading into the key upselling upcoming summer selling period in the rest of APAC.
Speaker #5: We saw a positive momentum in Q3 with plus 14% growth , mainly driven by China , India and South Korea . And while Turkey , Russell reserves continued to perform well .
Speaker #5: And we've also seen some initial reorders on Courvoisier following a clearing of the trade channels that we undertook following the acquisition. Okay, so let's now move on and look at a different way via the houses, starting first with the House of Aperitifs.
Speaker #5: Here we recorded resilient growth of plus 1% in the nine months , primarily driven by Sarti , Rosa and Aperol Spritz . As I mentioned while talking about the regional performance .
Speaker #5: How performance is impacted by a variety of factors during the quarter , and our dive a bit more on the next page . But in Italy , the impact was the result of pressured on premise Germany due to the delisting and operating conditions , and in the US we had an alignment of the inventory post tariff volatility in the US market , which impacted shipments .
Speaker #5: Excluding these three countries , all other countries remain on track with plus 4% growth in the nine months . For Campari , the main impact is coming from Brazil , where we had a very high comparison base from last year , I think near on 50% due to the rapid growth as well as price increases and excluding this impact , the performance remains solid with a plus 2% growth in Q3 and a plus 1% in the nine months .
Speaker #5: LED by the U.S., Italy, and the rest of the Americas. The remainder of the portfolio is showing positive trends across the regions.
Speaker #5: 30. Rosa continues its solid growth in its core German market, and it started to benefit from the rollout into other European markets as well.
Speaker #5: Apparel Spritz is performing nicely, driven by the convenience trends, and Crodino, our non-alcoholic spritz, is growing double digits across all European markets.
Speaker #5: As I said, let's have a closer look at our April. The geographic expansion is fully on track across all seeding markets.
Speaker #5: More than ten countries , representing 12% of the brand's total sales , are delivering outstanding double digit growth , reinforcing the strength of our approach and the excitement in these markets .
Speaker #5: And this really is a testament to the fact that Apple's desirability and consumer trends continue to support its growth on sell out . Our outperformance is continuing in the strategic on premise and in nebka in the US , European markets are facing some pressure , and it's evident , especially in the on premise data in Italy .
Speaker #5: Despite this , stock levels remain healthy in the trade in Germany , given the operating backdrop , Apple has been impacted , especially in the on premise .
Speaker #5: But if you include Sarti Rosa, in fact, we continue to perform better than the market in France and the UK.
Speaker #5: The performance is very robust, particularly benefiting from favorable weather conditions and excellent execution. This is all to say, we are very confident in the trajectory of Apple.
Speaker #5: It's a tough market, without a doubt, and the quarterly performance can get impacted by various factors. But the long-term opportunity remains fully intact.
Speaker #5: Looking at the House of Whiskey and Rum in whiskey, we recorded strong growth in Q3, with Wild Turkey benefiting from the stock availability in its core U.S. market.
Speaker #5: And you'll see it later in this session. But we also launched a new campaign, which we expect to support more going forward with initial encouraging results.
Speaker #5: South Korea and China are also supporting offers . Small base Jamaican rum showed a solid growth of 16% , with Q3 driven by an easy comp from last year from the hurricane last year , as well as strong underlying trends in the US and in Jamaica .
Speaker #5: In the House of agave , Espolon grew 3% in the nine months . Growth was supported especially by Reposado at 11% , while Blanco remained broadly flat due to our focus on pricing and Q3 was impacted by the phasing of shipments , key seeding markets also continued to grow for small base in line with our international expansion strategy .
Speaker #5: Within the House of Cognac and Champagne, Grand Marnier recorded a stabilized performance in Q3, also supported by an easy comp from last year.
Speaker #5: Courvoisier recorded €99 million of sales in the nine months and was included into our organic growth . As of May . As we already highlighted in our H1 call , we are piloting some brand marketing in the US and UK , which is showing initial positive results .
Speaker #5: And above all, I'm very proud to say that Courvoisier took top honors as Best Cognac for its 30 Year X.O. Royale at the 2025 Beverage Testing Institute Awards.
Speaker #5: In fact , out of a total of eight categories awarded during the event . Courvoisier was on the podium in four of them , with its XO Royale winning the top prize with XO VSOp and the Ves expressions , and it's clearly reinforces the quality of our liquid in our bottles .
Speaker #5: For the rest, I won't comment too much, just to note that 21% of our overall portfolio is currently classified as local brands. Given their geographic concentration, Sky remains an important part of the portfolio and showed a positive performance in Q3.
Speaker #5: Driven by Argentina, China, and Brazil, more than offsetting the ongoing softness in the core U.S. in line with other major players in the category.
Speaker #5: Okay , I also like to share some of the highlights of our activations from last time , and given that we're in our peak seasons , key focus for us has been aperitifs .
Speaker #5: In this period . So let's start with April music festivals are and will continue to be at the heart of our activation strategy for Aperol .
Speaker #5: This summer has been our biggest and boldest yet, with over 130 festivals in EMEA alone, reaching more than 10 million consumers and selling, yes, selling over 2.5 million Aperol serves.
Speaker #5: We're also once again in the US open , where Apple engaged with more than 90,000 attendees , driving 26 million influencer impressions for Campari , the main highlights of the quarter were the strong partnerships with the major film festivals Venice for the eighth , Locarno for the fifth , and Toronto for the second .
Speaker #5: Year . We're also very active during Negroni Week because , as you all know , there is no Negroni without Campari and this link with art , cinema and the Negroni are critical for the positioning of Campari and will continue to strengthen this further in the upcoming period .
Speaker #5: And moving from aperitifs to tequila, Espolon was also very active during the summer with its "Marg Days of Summer" campaign. Medium pressures increased by more than 28% compared to last year.
Speaker #5: Social impressions reached millions, leading to additional coverage in Forbes and Vogue. All of this culminated in a widely publicized drone show over New York.
Speaker #5: And lastly, we want to have a look at our new Wild Turkey campaign, which was launched at the beginning of September and focused on our legendary Master Distiller, Jimmy Russell.
Speaker #5: This initiative represents the brand's largest ever investment , with a media spend planned up to 12 million through 2026 . And this campaign is rolling out across the US and Japan in 25 , expanding to Australia , South Korea and other markets in 2026 , and the pre-launch testing ranked the campaign in the top 1 to 5% of benchmarks , showing strong purchase intent , brand saliency across the key markets .
Speaker #5: So, let's have a look at the video.
Speaker #6: Change is inevitable unless you decide it isn't. For over 70 years, Wild Turkey Master Distiller Jimmy Russell has known where to draw the line.
Speaker #6: He never changed the original recipe, aged it longer, and never watered it down for bold flavor. They may call it stubborn. Let 'em.
Speaker #7: When you know it's right, don't change a damn thing.
Speaker #5: Okay , I think I'm back . Hopefully , if the technology is working properly . So before I hand over to Paolo for the PNL and balance sheet section , I'd like to give you an update on our key strategic priorities .
Speaker #5: We're really excited to welcome many of you in person to our first ever Strategy Day . Coming up on the sixth and 7th of November in Milan , the agenda is going to be pretty packed , giving us the opportunity to review our future direction and priorities , while not forgetting to have a bit of fun showcase our brands and our amazing production capabilities .
Speaker #5: So moving on to cost containment , you can see that in Q3 , the declining trend we guided for in a has started and will continue in Q4 .
Speaker #5: Therefore, we are on track to achieve our target of 50 bps benefit on sales in 2025 and 200 bps benefit by the end of 2027 on portfolio streamlining. We continue to take the right steps after the disposal of Cinzano and our American plant.
Speaker #5: In the first half , we've now divested our 50% stake in Tannico , the Italian online wine and spirits business . Although this has limited impact on our results , it's another step in the right direction in terms of business simplification .
Speaker #5: In line with our strategy to focus on fewer, bigger bets, any additional potential disposal will be based on the optimization of potential proceeds, and I can say that more conversations are ongoing.
Speaker #5: Okay, with that said, I'm going to hand over to Paolo. Paolo.
Speaker #8: Thank you, Simon. First and foremost, I wish to thank Simon for his kind words at the beginning of the presentation on my past contribution to the Campari success.
Speaker #8: It's been an incredible journey , a privilege to engage with such a thoughtful and committed community of analysts and investors . Over the years , I look forward to continuing to support the group in my new role as Vice Chair , and I hope to see you , many of you again at our strategy .
Speaker #8: Strategy Day in in November . For now , let's dive into the results and the outlook for the remainder of the year . Now , if you follow me to slide 17 , let's start by looking at our Ebit margin dynamics for the last time together .
Speaker #8: I am happy to say that we have recorded solid results so far in 2025, with a flat EBITDA adjusted margin supported by gross margin accretion and cost containment benefits of brand building investments as planned.
Speaker #8: In terms of gross margin, nine months was up by 90 basis points, with an acceleration in Q3 of positive 180 basis points.
Speaker #8: This was mainly due to the positive mix and ongoing benefits of input costs, especially agave, as well as the contained tariff impact of just $6 million in 9 months.
Speaker #8: Tariff impact benefited , in fact , from some tariff in-house inventory position we were holding . Accordingly , our full year impact has been revised down to €15 million for 2025 AMP two sales reached 17.3% in nine months , with an acceleration during peak season , leading to a positive 9% organic yearly growth and a -110 basis points .
Speaker #8: Dilution's impact on margin. As I mentioned before, we continue to invest behind our brands, and our full-year guidance of 17% to 17.5% is fully confirmed.
Speaker #8: As you all know , our cost containment efforts are becoming more and more visible in Q3 , we had a declining trend of a -4% in value , and we are on track to reach a 50 basis points accretion guidance driven by ongoing value reduction in Q4 .
Speaker #8: Accordingly, adjusted EBITDA was realized at €517 million for the nine months. Within this, there was a positive contribution from the perimeter of €1.1 million, driven by Courvoisier until April.
Speaker #8: Net of agency brands and co-packing, the foreign exchange impact was realized at a positive €9.8 million, driven by the devaluation of the Mexican peso, offsetting the negative impact of the US dollar devaluation.
Speaker #8: Let's move on to look at our group pre-tax profit, with a few comments so far this year. Operating adjustments totaled €41.9 million, and that includes the impact of the planned disposal in Q1 and severance payments.
Speaker #8: Financial expenses came in at €18 million for the nine-month period. This is in line with our expectations of €105 million to €110 million for the full year.
Speaker #8: The increase versus nine months to 2024 was driven by higher average net debt, actually €2,365,000,000 this year, versus €2,000,000,071 million last year, mainly due to the base effect of Courvoisier closing on cash and debt.
Speaker #8: Average cost of net debt is now at 4.3% , versus 3.7% in nine months 2024 . As in previous quarters , we need to remember that last figure was artificially low , given cash at hand ahead of Courvoisier closing coming from acquisition funding adjusted nine months 2024 figure would have been 3.8% overall group pre-tax profit , adjusted amounted to €440.4 million in the nine months , indicating a -2.6% and group pre-tax profit came in at €398.8 million , with a negative 5.7% decline year's , moving on to look at the net debt , 19 net financial debt was at €2,000,000,241 million in nine months , improving by €136 million compared to 2024 , thanks to positive cash generation .
Speaker #8: This is before the further benefit expected from the proceeds of disposal after the closing , which is expected to occur before the end of the year , and will and will further contribute cash and cash equivalents were at €509 million , up versus first half due to cash generation to the end of 2024 .
Speaker #8: It is down by €157 million due to €78 million of dividend payment . CapEx initiatives . Loan repayments and employee termination payments . Lastly , in line with our strategic priority of balance sheet discipline , our leverage ratio improved to 2.9 times in nine months , down from 3.6 times in nine months at 2024 .
Speaker #8: Following the acquisition of Courvoisier and 3.2 times at the end of 2024. So, in 12 months, as we said before, we have a deleverage that is accounting for a 0.7 times performance of disposal.
Speaker #8: The ratio is slightly better at 2.85 times. This is a testament to our capability to actively manage our balance sheet, following acquisitions and bringing the leverage ratio down with further improvement.
Speaker #8: Expected going forward. Let me hand back to Simon to comment on our outlook.
Speaker #5: Great . Thanks very much , Paolo . I started this year by saying it was going to be a transition year , and in these nine months we've showed a resilient performance despite the ongoing challenging backdrop that you all know , the environment is still one of the most complex any of us has gone through .
Speaker #5: But we continue to outperform in key markets. At the same time, we keep our focus on what we can control in order to manage our balance sheet effectively.
Speaker #5: And the results is clear as you just heard from Paolo , for the full year , we continue to expect moderate organic top line growth , assuming no worsening of consumer confidence in Europe or in the US , and especially in the on trade so far in the nine months we recorded plus 1.5% organic growth , which confirms our targeted progression on Ebit adjusted margin , we're maintaining our flattish organic guidance , have this in guidance now includes the tariff impact and the drivers behind this revision are as follows .
Speaker #5: First , lower than previously guided negative impact from terrorists of 15 million . As Paolo mentioned before , due to the benefit of our tariff , in-house inventory position , of course , this is assuming that the current tariff rates remain the same , which we hope they do for now anyway , given the stability we've we've established .
Speaker #5: But just to consider , we will not have the same benefit next year . Second , the benefit of efficiency gains in Cogs and SG&A , where we continue to make good progress .
Speaker #5: This is more than offsetting the Reinvestments in A&P , which are critical for our brand building . And we believe investing now , while many others are cutting their budgets , helps to deliver strong long term brand benefits in terms of FX and perimeter , we expect limited overall impact in value terms .
Speaker #5: And regarding the medium to long-term outlook, we confirm our previous statements and are confident for the future. As I mentioned before, we'll come to the market with more details of how we're going to get there next week.
Speaker #5: During our Campari Strategy Day, to summarize, we keep our focus as planned in the key areas that we've mentioned before.
You know, this this is a very um, you know, key key drivers, you know, on the on the cocks, you know, we have, you know, original I like the 2000 Euro benefit uh, from uh, from input cost. You know, most of it coming from uh, from a. Uh, but also, you know, I have to say that, you know, many other Commodities you know, are are, you know, uh, the prices are are coming down the the only exception to that, the Romaine logistic cost where we have see, you know, negative variances of the, you know, a year ago, um, in terms of, uh, uh, you know, if you look at, you know, the the upcoming quarter and you know, more, you know, directionally into, you know, 2026, you know, for just coming quarter, uh, you know we think uh we will still benefit from, you know, positive contribution at the gross margin level. You know, as we've seen in, in the third quarter of the year, uh we will keep on, you know, benefiting from uh um reduction in value of
GNA due to the restructuring initiative. That is having, you know, an impact in in the second half as we have, you know, originally, you know, guided and more to come with with the further 90 business point in 2026 due to, you know, the full year effect of the initiatives, uh, that have been, you know, uh, implemented in year 2020, uh, 5, uh, with the mix. You know, the the very good news is that on espolon, you know, originally the objective
Was to achieve, you know, parity is a big group average gross margin by Q4 of this year. Instead. You know, we managed to put it forward to Q3. So, you know, espolon in Q3 was no longer a bleeder and that contributed to, you know, a uh, you know, positive, uh, positive mix clearly. You know, if we look at the, you know, composition of of the margin gain in the third quarter, you know, giving, uh, you know, the the pricing pressure that we had, uh, you know, most of the, you know, if not, you know, most of of the gain is coming from a cost cost benefits, uh, more than more than Nicks. And so the very same time economic, you know, we are expecting to to see in, in Q4 with, you know, promo, pressure, negative, impacting the company ability to take, you know, uh, net price, gains a Cox will keep on being, you know, positive and mix, you know, as we
Hope will positively contribute.
Um, so this is a little bit, you know, how we see, you know, the first quarter and next year, in terms of, you know, clearly, uh, you know, perspective. You know, in the past, uh, in the past years, our ability to drive, uh, gross margin expansion based on sales mix improvement is linked to, you know, the performance of primarily operators, but now also, you know,
Will be no longer a breeder. So you know, we remain extremely positive. So we the possibility of of of spending Rosemary via says mix Commodities remain, you know, you know, a Tailwind in 2026 wise at this stage, we believe, you know pricing you know the opportunities is made new and less evident given the current you know market conditions
Great. Thank you. Good.
And I think the call-out on affordability, you're seeing consistently across categories. And you know this whole cyclical-structural debate, I think everyone's example is cyclical, and me as a great example where you're seeing it across every category. It's not just within our category, put it that way.
Um, I think like, in terms of what we need to do on this, we are very good. I think at positioning the brands aspirational yes affordable. So the space we play in we've got to really create that value in the consumer's eyes. And so the best way to do that is execute brilliantly, and that's in the markets wherever we're carving out. We're getting gains or gaining share or outperforming its where we're really doing that and the consumers are seeing the value in what we offer. So I think that's that's the first thing in terms. We need to do. The second thing is then leveraging. Our our portfolio, we have a collection of brands that allow us to compete very effectively in these markets and you see that whether it be, you know, there may be a tougher performance on Apple in Germany, but the growth in society or the growth in cordino and other markets. So leveraging our portfolio is key. Um I mean more tactically. There are some opportunities I think we've got to focus on around Revenue management which you'll hear more about next week and just generally in terms of our overall strategy, I'm not going to take away from what you're going to hear next week. So maybe by the end of Friday you can let me know whether I've answered your question properly.
Thank you.
Thank you.
The next question is from Sanjit Ajla of UBS.
Hi Simon Powell. I'd also like to Echo my super congratulations, um, on your new role and, and and many thanks for all of the the help of the years and the conversations. Uh, so also 2 questions, uh, from me, uh, Simon. Um, I just want to come back to the consumer uh, demand environment in the US and Europe. Would you highlight? It's been a deterioration uh, between Q3 and Q2 and in particular how you seen the evolution of the competitive and pricing environment. Uh, would you say that further intensified uh, over the summer months? Um and um, that's my my first question uh, and then just coming back to to stop levels. Uh I think Andrea asked a question, but can you just give us a a flavor for where stock levels are particularly in the US and and and Italy and and and any anywhere else that might be noteworthy
Sure, absolutely. Um, so I think in terms of the performance between Q3 and Q2, it is very mixed. And as you know, looking at this data from a national point of view, it kind of blurs what's going on. Yeah, if you look at it, you look at the Nelson data, and it seems very kind of doom and gloom for the industry in many cases. But we have pockets of growth really coming through quite nicely. I mean, a good example that is not picked up is, you know, in our 11 cities that we're really focusing on building our role, we have 10 of them in double-digit growth.
So, when you talk about the deceleration, it really depends on where and on what. And I think that's where we're going to be a bit careful there and read timely conclusions, simply because of the negativity in the off-premise. We are still growing. We're growing in the on-premise, we're growing in Napa, and we're growing really successfully on the brands that we're focusing on and prioritizing. So, I think for me, it's more about what we're doing and where we're doing it than actually what's happening in the marketplace. As I've said before, we had the benefit of being a smaller operator in the U.S., and therefore, we've got to go after opportunities that maybe some of the other companies don't have.
I think your second,
On the pricing environment.
Uh, I think you're saying you see the same data we see, which is for a mixed point of view. Again, it depends on which category, I think you're starting to see a bit more price. Uh, competition coming through in Blanco as we've seen within the tequila, sector, repo is dipping down a bit, but if you look at the overall price, mix actually, the tier that most of it is coming from. Is the tier above where we play with espolon? It's up at the super premium price point where you've got a mix of memory at 2.6% negative as consumers are now trying to, you know, or or brands are trying to capture that consumer affordability in that end. And that's actually creating a good opportunity for us and people on the on the down trade. Um so look we're going to have to carry on seeing. I think it's going to be a pretty uh pretty aggressive. Festive, period. I think everyone is going to be up to trying to close out the calendar year strongly so we'll have to wait and see but I'm very confident in terms of the plans that the team's got
Um, I mean, in terms of the stock levels as quickly in the US, I'm very happy. As I said before, with the levels of stock, we've got, we can, you know, we've managed to take down some of the pre tariff stock that we put in, which on the flip side of that allowed us to not, get hit by the tariffs, quite as much as we originally forecasting. So, that's impacted some of the shipment numbers that you've seen in Q3 in Europe. Again, very happy, you see the stock levels? We've seen in in Italy.
Um, and you know, perfectly normal with what we're seeing in terms of sellout. I'm not concerned about excess stock anywhere. There was, I'm not concerned about heavy pushing through to land Q3. I feel pretty confident. And then, you know, without getting into the performance in Q4, I'm not seeing any hangovers running from Q3, put it that way.
Very helpful. Thank you.
The next question is from Simon Hales of City.
Uh, thank you. Hi Simon, hi Paulo. And uh, yes how can I Echo the congratulations to you Paulo and look forward to celebrating properly with you, uh, when we see you next week at the strategy day. Um, so just a couple of quick ones for me as well, please. Um, I understand, can I just go back to the US so of briefly and uh, I wonder if you could just talk about whether you, you obviously we've seen Ed deteriorating underlying Trend in the industry through Q3. I appreciate, uh, in the New York out performing that and some of your comments earlier in, in terms of you're still winning where you're investing. I wonder what you're seeing as we've come into the early parts of Q4. I've seen the important festive season to come has that deterioration in Trend fed through to just sort of. Do you think weaker ordering by wholesalers in the US? I mean, any comments and color there would be interesting. Um, and then secondly, just coming back to Jamaica. I appreciate its very early days, given the hurricane only, uh, hit last night and your focus is rightly on the safety of your people. Um, but you obviously,
Confirming that at this stage your full year 2025 for group moderate organic sales growth, I think consensus is looking for around 2% to be moderate for the year. I just wonder, you know, is that deliverable, that moderate sales growth, even if the disruption in Jamaica ends up being pretty significant, given the hurricane?
Yes, I'm a good questions. I mean, I think look in terms of the underlying Q3 and and heading into Q4, you know, we're certainly living in a dynamic, uh, environment at my as where I describe it. So I think ultimately, you know, the we're not seeing any real pressure from starting from our relationships and going through on the wholesaler side, but that's also probably because we're actually in a reasonably healthy stock position. Already a healthier than not too high. Is what I mean by that um, and appropriate for what we need going forward. So I think, you know, as I've said on previous calls that the cost of capital both in on premise retailers and wholesalers is clearly. Ask people is now asking about, you know, what are people do stocking further for us? We feel pretty confident in terms of the flow, you know, we're very confident in terms of the stock levels at each level. Um so we don't really see too much of that coming through. I think what will be interesting is whether or not retailers are willing to take in the holiday stock that they normally take in and I think that's something we don't know yet we've had no indication they're not going to but again you know I think
Things are changing quite quickly in the marketplace, and we’ll see—maybe they’re taking half as much through the holiday to wait and see what the consumer does. So that may impact, again, for us, it comes back to, you know, a big chunk of our business is in the on-premises as well. So we’ve got to make sure we’re executing really well in the on-premise. The team is doing a good job on that, but also making sure that we can respond to those changes if they come through in the purchase path.
Um something on the first question again, it's difficult to kind of predict what's going to happen as you know. But uh but we feel pretty confident with the plans that we've got.
On your second question, on Jamaica. You're absolutely right. Look, it's all about the team and, and, you know, and making sure everyone's safe at the moment. Uh, I've got calls later tonight with the team to find out where we are in terms of, for this year. I want to be clear that, you know, we've already shipped a vast majority of the stuff that we need to close out the year out of out of Jamaica and we're sitting on healthy inventory positions to meet the demands. So I don't see that being an impact into this fiscal or impacting our, our Ambitions to close out the year strongly.
Um, I think until I've seen or until I hear really what the team has found once. I've established. Everyone's okay. Then I'll be in a better position to give it maybe a bit more of an update next week in terms of what we've found out. But at this stage, it's very hard to get the communication. I think, you know, electricity is out. Phones are out a lot of, the roads are blocked. Uh, we're getting kind of piece male information. We've got a call later tonight and and I'll know a bit more, but I probably won't have the full picture tonight, either.
But in terms of full year impact, I don't think it's a significant impact.
Brilliant really helpful. Thank you.
The next question is from Mitch Colette of Deutsche Bank.
Thanks. Uh, and I'd also like to say thank you very much, Paolo, for all your help, uh, and patience over the years, and good luck with the future. Um, to two questions from me, please. So the first one is a little bit similar to what we've had before, but you've obviously reiterated this year's guidance. However, you've added this line about assuming no further worsening of consumer confidence in Europe.
Visibility is low. It's still early to ask for a read on 2026, but the question I want to ask is, you know, do you think that next year, you'll be in that mid to high single digit organic growth range? And and I guess if not you know what what do you need to see to get there? Thank you.
Okay, hi Mitch. Um yeah, in terms of the guidance uh the reason we put that in is as I said on the literally on the first call, I think I came on with when controlling what we can control and so the team is working through that. And so yes we've only got a, you know, a couple of months to go to close out the year, but this is probably been a year with with high volatility and I've seen in 31 years. We've had terrorists with economic pressures, geopolitical changes, and as a result, we're seeing consumer Behavior, really change, quite quickly. And certainly a lot quicker in terms of purchase behavior. And that was the only reason we put it in, we want to be prudent. We want to make sure that we land the year in line with what we've told you. Each 1 of these calls are what we're going to do. So I think we're just kind of being a bit bit prudent there. I'm, I'm confident that we can get where we need to get to, um, but I think it's also recognizing that something outside of our control. And therefore, you know, we want to make sure that we've, we've kind of covered that off in terms of uh, in terms of our guidance.
I think in terms of your question on 26. Yeah, you're right. I'm not going to give you an answer yet, um, in terms of where we are, uh, but I think,
The reason we've said our medium-term outlook—and we'll talk more about this next Thursday and Friday—is really about how confidence in that longer-term outlook and medium-term outlook. What we anticipate in 2026 will be a step on that journey, exactly what step we need to confirm. We want to close out this year, and we'll be able to give more guidance once we see how we finish out the year. But it would be, I think, a positive step in that direction. Again, the only caveat on that is there's a bunch of stuff outside of our control and volatility at levels we haven't seen before. So, again, what I want to be able to do is be prudent and make sure we can deliver what we tell you we're going to deliver.
Okay, that's helpful. Thank you.
The next question is from Lawrence Wyatt of Barclays.
Uh thanks very much for the questions Simon and Paulo. Can I Echo all the comments to Paulo and thank you for all your hard work and helped over the years and look forward to seeing you next week at the capital markets day. Uh a couple of questions for me there. Please uh just on the on the Tariff impact. Um you mentioned you've managed to get around some of the tariffs by using some of your stocks. Presumably, that means that some of the impacts will be felt next year. And I was wondering if you could quantify, uh, what sort of tariff impact you would expect next year? Once you no longer have that the benefit of the stock and whether you think you've had to take any price in order to uh, overcome some of those tariffs. And if so, so on what brands do you think they'll be taking on?
And then secondly uh, with regards to esplin, of course, the expectations of tequila over the past few years have been, I guess pretty pretty heroic. The growth has been enormous, and of course, that slowed down somewhat in, in recent months and quarters just wondering on your sort of contracted Agave Supply, whether you've had to adjust, uh, how much Agave you've, uh, you're buying in from from Mexico. And whether that's benefit giving you some of the benefits, on the the margin on, uh, Elon recently. Thank you very much.
Well uh yeah, um on the Tariff. Uh, you know, the we confirm you know, as though you know this year we're benefiting from, you know, already existing, you know, in-house. Uh uh stocks you know for next year unfortunately uh if nothing changes, you know, the 37 million euro guidance that we've uh you know, highlighted before stays so you know, it's a completely unchanged.
You know, you alluded to the opportunity of taking price. Of course, there's always the opportunity to do badly and mitigate the impact, but we also, uh, we also have to recognize the fact that, uh, you know, the...
You know, the the US, uh, uh, you know, environment is particularly competitive at the moment. Therefore, you know, I wouldn't, uh, you know, Bank on it at this stage.
Um, why I sent on the second question is that we, you know, the the pain, you know, the pain brand, uh, uh, you know, we've uh, managed to to tweak down, you know, the the prices and the commitments. Um, and so this is why, you know, we're we're benefiting from uh, from the decline of of the Agave price, you know, for next year, there will be still, you know, you know, a tail end opportunities sitting in the, um, in the, in the current Trend. You know, we have, you know, the directionally highlighted in the past, you know, 5 million Euros, which is, you know, I think, you know, makes sense is confirmed for for next year.
So we have a little bit of, of Tailwind, or some that on on in cost for for next year.
Well, we're in a good spot on our suppliers.
Thank you very much. Look forward to see you next week.
The next question is from Trevor Sterling of Bernstein.
Uh hi Simon and Paulo. I suppose let me add to the to the tube pilot uh and look forward to to really having a proper drink and celebrating next week. Um,
Sorry, probably one question for you. If you look at the Espolon shipment data, it looked kind of weak around minus 1. And so the sellout data we see in, uh, in NAMA is much stronger than that. I think you alluded to shipment phasing. And maybe could you just give me some sense of where you think Espolon is on an underlying basis?
Hi Charlie. Yeah, you're right. I mean in terms of shipments down 1 and then you see the performance on the sellout, uh, we're basically the 2 was actually just docking the stock that we brought in ahead of the Tariff and we're still unsure as to what was going to happen there. And so, we've just been working that through, which is whether the ultimate the shipments will catch up with, with the sellout performance. Uh, it's the first thing, the second thing on that is just to submit around the different states as well, where we're shipping stuff as well. So in terms of whether repo or whether it's Blanco, um, again there's just some different phasing in terms of that. So I don't think either of them are big drivers, it's more just about, I think you'll see some catch up on that. Uh, as we've as we close out the year and head into q1,
Yeah. And then if you just want to follow up on the strengths of both Jamaica and the Jamaican-run portfolio, you know, it seems really strong. I mean, I think Jamaica and Jamaican-run have done about 1,920 this time last year, and you're up 4,550, which would imply you got underlying growth, as you know, probably in some of the region of 20%, at least. Does that sound about right?
Hello.
Gentlemen, do you have your phone on mute?
Sorry about that, I thought I'd hit it. Um, the uh, in terms of the, the Jamaican rum performance. Um, really a couple of drivers on that 1 is the performance in Jamaica. So we're cycling the the disruption of the hurricane last year. Which now, it looks like we might be doing the same this year. Um, so that's 1 of the drivers but the brand is incredibly powerful on the island and the team has done an excellent job of of continuing to, uh, to drive the execution. So that's been 1 area. The second area has been the fact that we were out of stock in the US and so now that we've got stopped back in that's allowed us to give us a very positive uh positive performance there as well. So put those 2 things together. That's really why.
Super. Thanks very much, Simon. Thank you, Paula.
Um, good evening all and yeah uh another round of thanks for Paulo from me for the support over the years and also congratulations on the The Glen Grant sale, which you highlight in there. The the annex, which gone to raise some good money for charity. So good were there. Um, what 1 question on corvo again? Um, are we through the last really disrupted period for corvo? Because if my numbers are right, you've probably done 13, 14 million euros of organic sales through on Corey. And should that be normalizing into the fourth quarter or or or, or should we still expect to see? Um, you know, continued strong momentum of that brand comes back because certainly the the 99 million was was a bit ahead of what I was forecasting for for the 9 months. Thanks.
No, I think, you know, as we we progress further into the upcoming quarters, you know, the you know the the shipment performance of over there will you know, basically, you know, mirror, you know, the depletion and and the sellout Trend so, you know, it's, you know, clear the beginning, we we've benefited from, you know, the first time consolidation of, of what was it. So, you know,
Uh, I think is, you know, most of that is behind us.
That the D stocking phase. So it's on a more normal component of fourth quarter. Yes. And and, and you still expecting to release continue to release cash from the inventories. Given the levels, they were at
Yeah. Now on the inventory side. Uh, you know, we, you know, as we said there, you know, we have, uh,
A lot of aging, uh, you know, aging liquid, you know, over time we will we will.
More than, you know, selling liquid, you know, contain, you know, the intake working wage in New, New, New Order is, uh, so yes, it is directionally positive. It will take time to absorb, you know, the stock we've taken on board as we bought the, you know, the brand.
Thank you very much.
The next question is from Alessandro Torah of Mediobanca.
Yes, I good.
You have two questions, okay? The first one: can you comment a little bit on the depth of the BDS trajectory, considering the leverage ratio you already got in the nine months?
If we can assume, let's say, that you're going to stay below the 3 times, by your end, or if we need to think about any seasonality or any factors that should bring this ratio, let's say again about these times.
This is the first question. The second 1 is just a follow up on if you can comment a little bit, let's say the recent change on the duty free side and you if you expect also a significant, let's say impact on the reorder on the duty week. Thanks.
Yeah, on the leverage ratio target, you know, we're not giving any guidance.
You know, we also have to take into consideration the Fed. In Q4, we still have a significant tail of extraordinary capex.
You know the total amount of capex is 100 million euros and in the first 9 months we've already, you know, spent 120 million Euros. So there is 80 million euro. You know, cash outlay coming from extraordinary capex in in Q4.
Uh, yeah, but that actually you're right in saying to the company. Generates uh you know, a lot of free cash flow uh 1 of the highest uh, you know, uh free cash flow to be the conversion in in in the sector average for The Last 5 Years. You know, about 60%. Uh, so you know, we, you know, you can easily calculate the dirty leverage potential in in coming years.
Okay, okay, okay. And Alexander, sorry, I couldn't quite hear the question. No, no. Okay, team here on, we got the recent change on GD3, on KUB, and others, but we aren't sure what the question was.
Yeah, it was related to, to know, it was related to to, to China. I know it's, let's say, it's not so so big for you, but if we look at, let's say the GTR and the, you know, uh, this stock that is now possible. Now, according to the recent, uh, tariff agreement. Uh, if you see, let's say any restock for Kuba in the coming months. Ah, right. Sorry. Yeah. So I can hear you. Yeah. Look for us as, you know, look at China is is very small for kubaz and so is so is the the the Asian duty free at this stage? So it's not a big driver for us. I think China represents, you know, less than 2% of Kubo sales. So the key thing we want to look at in GTR as part of our relaunch plan of of was here cross the region.
A strategic role that GTR plays as a shop window for the consumer. So I think that's more where we'll see it as part of the new strategy. But yeah, there's no, we're not looking at a restock, and the chance it would be would be negligible in our case anyway.
Okay, thanks.
As a reminder, if you wish to register for a question, please press star and 1 on your touchtone telephone.
For any further questions, please press star and 1 on your telephone.
Gentlemen, there are no more questions registered, would you like to make any closing remarks? Yeah, I would just like really thanks very much and look forward to um seeing many of you next week. Uh, just to reiterate, you know, all of your thanks to Paulo again, a remarkable run and a remarkable set of earnings reports and uh, we're close to the class to him next week. So thank you again, Paulo, and we'll see you next week. Thanks for your time.
Bye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Tonight, I promise you, I had it like this. It's a whole lot of girls up in here, but ain't nobody with my, my favorite hobby is probably getting rich. I see them. Sorry, but they're hardly on.
A whole lot of girls up in.
Here. Can't nobody. Who am I? Hey, you can only do it for your sometimes.
Daddy got away but he got no drive. You said he got to watch that. Don't shine and she love me cuz I hit it in the sun, right?