Campari announces 2013 first half results

2013 first half results in line with expectations

Improving overall trends in the second quarter 2013

Successful implementation of the Group’s efficiency programs


Results Highlights

  • Sales: € 698.6 million (+13.0%, organic change -3.3%)
  • Contribution after A&P: € 258.0 million (-0.7%, organic change -11.5%, 36.9% of sales)
  • EBITDA pre one-offs: € 145.6 million (-10.6%, organic change -18.8%, 20.8% of sales)
  • EBIT pre one-offs: € 125.4 million (-14.9%, organic change -21.7%, 17.9% of sales)
  • Group net profit: € 57.6 million (-26.1%)
  • Net financial debt: € 944.3 million (€ 869.7 million as of 31 December 2012)

 

Milan, August 6, 2013 - The Board of Directors of Davide Campari-Milano S.p.A. (Reuters CPRI.MI - Bloomberg CPR IM) approved the consolidated results for the first half year ending 30 June 2013.

The Group’s results in the first half of 2013 were in line with expectations, driven by the return to a positive organic sales performance in Q2 2013 (+1.4%) and the positive contribution of the acquisition of Lascelles deMercado &Co. Ltd. (‘LdM’).

Bob Kunze-Concewitz, Chief Executive Officer: In the first half of 2013 results were in line with expectations, thanks to the return to positive organic performance in the second quarter driven by the sustained growth in North America, Russia and Argentina as well as the stabilization or improvement of trends in other developed markets (particularly Italy and Germany). Theaperitif business proved its resilience, although it was affected by very adverse weather conditions. SKYY and Wild Turkey franchises continued their positive momentum. Cinzano performed strongly driven by Russia and the newly integrated Appleton rum portfolio maintained its positive performance in core North America and New Zealand. Following the negative impact of the one-off destocking in Italy in the first quarter of 2013, the overall performance in first half of 2013 was also affected by a disproportional concentration of non-recurring charges which reflected the decisions of the Group to accelerate on restructuring projects to strengthen the business in the medium term. Looking forward, whilst the Group’s overall trading environment should remain volatile due to macroeconomic difficulties in key markets, we expect the business to continue improving gradually over the second half of 2013, driven by sustained brand building across key brand-market combinations and the strengthening resonance of the brand portfolio in new geographies..

 

In the first half of 2013 Group sales totalled € 698.6 million showing a reported growth of +13.0% and an organic change of -3.3%. The exchange rates effect was a negative -1.8%. The perimeter effect was positive at +18.1%, driven by the newly-acquired LdM.

It should be noted that, as anticipated, the overall negative sales organic change was mainly attributable to the technical effect on the 2013 first quarter results of the so called article 62[1] (introducing a binding time limit to the payment terms that can be extended to clients) on the summer load program in Italy (a commercial initiative usually implemented in the first months of the year ahead of the summer seasonality consumption peak). The consequence was a ‘one-off’ destocking effect of € 25 million on sales in the first quarter of 2013, which determined a significant deterioration of the sales mix and, consequently, a negative impact on operating margins. Moreover, the impact of the new LdM business, although in line with plans both in absolute terms and marginality, generated a dilution in the Group margins generated by the weight of the lower margin sugar and merchandise activities in the acquired business. This dilution lessened in the second quarter, characterised by a lower seasonality of the lower margin sugar and merchandise business vs. core spirits&wines, compared to the first quarter.

Gross margin was € 373.4 million, up by +2.8% (-6.8% organic change), or 53.4% of sales.

Advertising and promotion spending (A&P) was up by +11.7% to € 115.4 million, or 16.5% of sales (16.7% of sales in the first half of 2012).

Contribution after A&P (gross margin after A&P)was down by -0.7% to € 258.0million (-11.5% organic change), or 36.9% of sales.

Structure costs, i.e. selling, general and administrative costs, increased by +17.8%, or 19.0% of sales, mainly as a result of the consolidation of LdM.

EBITDA pre one-offs was down by -10.6% to € 145.6 million (-18.8% organic change), or 20.8% of sales.

EBITDA reached € 140.7 million, a decrease of -11.7%, or 20.1% of sales.

EBIT pre one-offs declined by -14.9% to 125.4 million (-21.7% organic change), or 17.9% of sales.

EBIT reached € 120.5 million, a reduction of -16.2% or 17.3% of sales.

Net negative one-off’s of € (4.9) million in the first half of 2013, of which € (8.7) million only in the second quarter 2013, were mainly attributable to restructuring programs implemented in Italy, Jamaica and, to a lesser extent, other Group’s subsidiaries as well as other net non-recurring charges.

Pre-tax profit was 92.2 million, down by -24.9%.

Group net profit reached 57.6 million, down by -26.1%.

As of 30 June 2013, net financial debt stood at € 944.3 million (€ 869.7 million as of 31 December 2012).

 

CONSOLIDATED SALES OF THE FIRST HALF OF 2013

Looking at sales by region in the first half of 2013, the Americas (44.4% of total Group sales) posted an overall growth of +49.2%, with a good organic increase of +7.5%, a perimeter effect of +46.0% thanks to LdM, and an exchange rate effect of -4.4%. In the US (21.2% of total Group sales) sales registered an organic increase of +8.2%, driven by double digit growth in the Wild Turkey franchise, driven by Wild Turkey bourbon and American Honey, and Campari as well as continued positive performance of the SKYY franchise, driven by the core brand and Infusions. The perimeter effect was positive by +3.2% (due to LdM) and the exchange rate effect was negative by -1.3%. Sales in Brazil (4.8% of total Group sales) registered a negative organic change of -1.5%, driven by the slowdown of local brands (Dreher, Old Eight and Drury’s) which was in part offset by the continued strong performances of the SKYY franchise, Sagatiba and Campari premium brands. Sales in the other Americas (18.4% of total Group sales) showed an organic growth of +14.4%, mainly driven by a strong performance in Argentina (Campari and Old Smuggler). Perimeter change in the Other Americas was +252.6%, driven by the first time consolidation of LdM (Jamaica reaching 11.3% of Group sales in the first half of 2013). The exchange rate effect was -10.4%.

The Italian market (25.7% of total Group sales) recorded an overall decline of -15.7%, attributable to an organic performance of -16.0% and a positive perimeter effect of +0.3%. The negative organic performance was driven by the destocking effect in the first quarter of 2013 (c. € 25 million) as well as the continued weak consumption trend and very poor weather conditions in second quarter of 2013. The organic performance registered in the second quarter of 2013 was -6.6% (-26.3% in the first quarter 2013), showing a stabilizing trend in Italy. The key brands Campari, Campari Soda and SKYY Vodka declined as a result of the combined negative effect of the first quarter 2013 destocking effect and the continued tough economic environment. In the second quarter Aperol registered a soft performance particularly impacted by very poor weather conditions. The wine portfolio declined, suffering from a continued slowdown in the restaurant channel due to a weak consumption environment. Soft drinks were also heavily affected by the above mentioned trade destocking, the overall slowdown in consumption in the traditional day-bars channel and the very poor weather conditions.

Sales in the rest of Europe (20.6% of total Group sales) grew by +4.6% overall, driven by flat organic change, a perimeter effect of +5.2%, due to a new distribution agreement in Germany as well as LdM, and an exchange rate effect of -0.6%. The organic performance was driven by the good recovery registered in the second quarter of 2013 (+7.3%), driven by a positive performance in Germany, UK and France. In the first half of 2013 Germany recorded an organic change of -5.7%, as the recovery registered in the second quarter (+5.9%) driven by Cinzano, Campari and Ouzo12 was not able to offset the expected softness of Aperol, exacerbated by very poor weather conditions. Russia on the contrary was up +21.1% showing strong results across the key Cinzano and Mondoro brands. Other European markets registered mixed results: a positive trend in UK was more than offset by a decline in Spain.

Sales in the rest of the world (including Global Travel Retail), which accounted for 9.3% of total Group sales, grew by +7.9% overall, with an organic change of -3.5% and an exchange rate effect of -2.1%. Perimeter change was +13.4% thanks to LdM. The organic sales decline was driven by weak results in Australia (down by -9.8% in the first half of 2013) due to the weak shipments of Wild Turkey franchise, driven by the heightened competitive pressure on core bourbon and RTD and Riccadonna sparkling wines. The market performance, also affected by tough comps, was in part offset by positive trends in SKYY and Aperol. A positive development was also achieved in the region’s other key markets, including China, New Zealand, South Africa and GTR.

Looking at sales by the key brands, regarding spirits (74.3% of Group sales) Campari registered an organic growth of +1.5% in the first half of 2013notwithstanding the weak shipments in Italy, still impacted by the trade destocking registered in the first quarter. In the second quarter Campari registered double digit growth driven by the continued strong performances in USA and Argentina coupled with a partial recovery in Italy and Germany. Aperol had an organic performance of -10.0%, affected by the expected weakness in Germany and the very poor weather conditions registered across Europe in the second quarter,and recorded continued strong positive trend in all other international markets. SKYY sales achieved an organic growth of +4.8%, driven by the continued positive performance in the US thanks to SKYY Infusions’ continued success (particularly Moscato Grape) and the positive momentum behind the core brand. Good results continued in key international markets, particularly Brazil, South Africa and Germany. The Wild Turkey franchise registered an organic growth of +3.3%, thanks to the double digit growth in US partly offset by softness in Australia and Japan as well as a tough comp base (+22.1% in 1H 2012). The Tequila portfolio registered a continued organic growth of +12.0%, driven by both Espolón and Cabo Wabo in the key US market. Campari Soda declined by -19.5%, affected bythe destocking registered in the first quarter in Italy as well as the very challenging environment and weak trading conditions in day bars channel and off trade. The Brazilian brands posted negative results in the first half of 2013, down -9.9%,affected by the general consumption slowdown in Brazil. GlenGrant registered an organic growth of +1.3%, driven by the positive performance in France, Germany, GTR and Japan, which more than offset a weak performance in the core Italian market.

In terms of wines, which accounted for 11.8% of total sales, Cinzano vermouths registered an organic growth of +0.9%, driven bythepositive performances in Russia and Germany which offset declines in other developed markets. Sales of Cinzano sparkling wines registered a positive organic performance of 5.0%, driven by the continued strong performance of Russia, as well as a good recovery in Germany in the second quarter, more than offsetting the weakness registered in Italy. Other sparkling wines (including Riccadonna, Odessa andMondoro) grew organically by +28.5% driven by a strong trend of Mondoro in Russia, whilst still wines (mainly Sella&Mosca, Enrico Serafino and Teruzzi&Puthod) declined due to continued weakness in the Italian on premise channel.

In terms of soft drinks (6.2% of total sales), Crodino declined by -29.6% as a result of the first quarter destocking, very challenging trading and consumer environment in day bars and off trade channels in Italy as well as the very poor weather conditions registered in the second quarter.

 

The Executive responsible for preparing Davide Campari-Milano S.p.A.’s financial reports, Paolo Marchesini, certifies - pursuant to article 154 bis, paragraph 2 of the Legislative Decree 58/1998 - that the accounting disclosures in this statement correspond to the accounting documents, ledgers and entries.

Publishing date: 
06 Aug 2013
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Last updated Aug 06 2013