Gruppo Campari announces 2015 Full Year results
Positive results across all key performance indicators in FY 2015
Accelerated organic growth and margin expansion thanks to continued sales mix improvement in Q4
Continued outperformance of high margin Global priorities and developed markets
Sales growth: +6.2% reported, organic growth +3.0%,
Global Priorities organic growth sales +8.2%
EBIT pre one-off’s: reported growth +11.6%, organic growth +6.1%
Strong free cash flow generation
Proposed dividend of € 0.09 per share, increasing by +12.5%
2015 results Highlights
Sales: € 1,656.8 million (+6.2%, organic growth +3.0%)
Contribution after A&P: € 630.8 million (+10.5%, organic growth +5.1%, 38.1% of sales)
EBITDA pre one-off’s: € 380.1 million (+12.6%, organic change +6.8%, 22.9% of sales)
EBIT pre one-off’s: € 332.7 million (+11.6%, organic change +6.1%, 20.1% of sales)
Group net profit up by +36.1%
Adjusted Group net profit of € 185.9 million, up by +20.4% on a like-for-like basis
Net financial debt: € 825.8 million (€ 978.5 million as of 31 December 2014) positively affected by robust cash flow generation (free cash flow of € 200.0 million). Net debt to EBITDA pro-forma ratio at 2.2 times (2.9 times as of 31 December 2014)
2015 proposed dividend of € 0.09 per share, increasing by +12.5% compared to previous year
KEY GROWTH DRIVERS IN 2015
Organic growth: overall very positive results
Solid organic sales growth +3.0% in full year 2015, showing an acceleration in the last quarter (+4.2%).Organic growth in Global Priorities +8.2% in 2015, gaining traction in the last quarter (+10.8%). Overall organic sales performance excluding weak result in Russia +4.9%.
Thanks to the continued improvement in sales mix by brand and market, EBIT pre one-off’s grew organically by +6.1% on a full year basis (+9.4% in last quarter) leading to a margin expansion on net sales of +60 basis points on a full year organic basis (+110 basis point in the last quarter).
Forex: favourable impact driven by US dollar
Positive impact of +4.1% in sales and +6.4% in EBIT pre one-off’s driven by a revaluation of key currencies against the Euro, particularly the US dollar, partially worsened in the fourth quarter of 2015.
External growth: negative net effect driven by non-core business disposals
Perimeter effect of -1.0% in sales and -0.9% in EBIT pre one-off’s, driven by the combined effect of acquisitions and both the termination of some distribution agreements and the sale of non-core businesses.
Bob Kunze-Concewitz, Chief Executive Officer: ‘We delivered very positive results across all key performance indicators in 2015. In particular, results were sustained by very favourable organic growth, accelerating in the last part of the year, notwithstanding the increased weakness in some emerging markets (Russia and Nigeria), due to a difficult macroeconomic environment. At the same time, we achieved a very positive progression in operating margins with a further improvement in the fourth quarter. We achieved the results thanks to the consistent execution of our growth strategy which drove a continuous improvement of sales mix by brand and market, in line with the Group’s objectives. In particular, high margin global priority brands outperformed the Group’s overall organic growth and accelerated in the fourth quarter, leading to operating margin improvement at Group level. The latter benefitted also, on the one hand, from solid growth of the high-margin developed markets (particularly the US and Western Europe) and, on the other hand, the slowdown of some emerging markets with lower than Group average margin. Looking forward, with respect to the macroeconomic environment, we expect the volatility in some emerging markets and the recent devaluation of Group’s key foreign currencies to continue during 2016. Simultaneously, we are confident to achieve a positive and profitable development of the business, driven by the growth of high-margin global priority brands (particularly the aperitifs, the American whiskies and the Jamaican rums), and by the positive performance of strategic markets for the Group. In particular, we expect to continue to positively exploit the growth potential of our brands and markets thanks to consistent investments in brand building, the positive contribution from innovations as well as a continued leverage of the Group’s strengthened distribution platform and business infrastructure.’.
Milan, March 1, 2016-The Board of Directors of Davide Campari-Milano S.p.A. (Reuters CPRI.MI-Bloomberg CPR IM) approved the company’s accounts and consolidated results for the fiscal year ending 31 December 2015.
GRUPPO CAMPARI UPDATED SEGMENT REPORTING
As previously disclosed, as required by IFRS, starting from January 1, 2015, Gruppo Campari has reorganised its geographic reporting segments to reflect some recent organisational changes. The new regions are Americas, SEMEA (Southern Europe, Middle East and Africa), North, Central and Eastern Europe and Asia Pacific.
Moreover, starting from January 1, 2015, Gruppo Campari has refined its brand clusters to better reflect the business focus on the key growth opportunities. The brand clusters are: Global Priorities, including Campari, Aperol, SKYY, Wild Turkey and the Jamaican rums; Regional Priorities,including bitters (Cynar, Averna and Braulio), liqueurs (Frangelico and Carolans), whiskies (GlenGrant and Forty Creek), tequila (Espolòn), sparkling wines and vermouth (Cinzano, Riccadonna and Mondoro); Local Priorities, including Campari Soda, Crodino, Wild Turkey ready-to-drink, Ouzo 12, Cabo Wabo, Sagatiba and Dreher; Rest of portfolio,including agency brands, and non-core businesses.
RESULTS FOR THE FULL YEAR 2015
In 2015 Group sales totalled € 1,656.8 million showing a reported increase of +6.2%. Organic sales growth was +3.0%, driven by high margin Global priorities (+8.2%) and mitigated by the poor performance of low margin businesses, such as Russia and the non-core Jamaican sugar business that negatively impacted the Group organic performance by -1.9% and -0.4% respectively.
The exchange rate effect was +4.1%, driven by the strong appreciation of the US Dollar (+19.8%) and the Jamaican Dollar (+13.5%) as well as favourable trends in all other key Group currencies, with the exception of the Russian Rouble and the Brazilian Real.
The perimeter effect of -1.0% was the combined effect of acquisitions and both the termination of some distribution agreements and the sale of non-core businesses.
Gross profit increased by +10.3% to € 917.1 million (+4.7% organic change), at 55.4% of sales.
Advertising and promotion spending (A&P) was up by +9.8% to € 286.3 million, at 17.3% of sales.
CAAP (Contribution after A&P)was up by +10.5% to € 630.8million (+5.1% organic change), at 38.1% of sales.
Structure costs, i.e. selling, general and administrative costs, increased by +9.3%to € 298.0 million, at 18.0% of sales.
EBITDA pre one-off’s was up by +12.6% to € 380.1 million (+6.8% organic change), at 22.9% of sales.
EBIT pre one-off’s increased by +11.6% to € 332.7 million (+6.1% organic change), at 20.1% of sales.
Negative one-off’s of € 22.9 million, included € 16.2 million of non-cash write-down’s of trademarks and disposed assets, as well as provisions relating to restructuring projects. It should be noted that one-off’s in 2014 were negative by € 43.2 million.
EBITDA reached € 357.1 million, an increase of +21.3%, at 21.6% of sales.
EBIT reached € 309.8 million, an increase of +21.5%, at 18.7% of sales.
Pre-tax profit was € 249.4 million, up by +28.4%, mainly driven by EBIT growth.
Group net profit was € 175.4 million, up by +36.1%.
Adjusted Group net profitwas € 185.9 million, up by +20.4% on a like-for-like basis.
As of December 31, 2015, net financial debt stood at € 825.8 million (€ 978.5 million as of December 31, 2014), after the dividend payment and the repurchasing of own shares. The reduction in the net financial debt was mainly driven by the healthy cash flow generation (free cash flow of € 200.0 million in FY 2015 vs. € 177.9 million in FY 2014), which accelerated in the fourth quarter, and was partially mitigated by thenegative impact on net debt as of year-end due to the unfavourable exchange rate impact driven by the US Dollar. Net debt to EBITDA pro-forma ratio is 2.2 times as of 31 December 2015, improving vs. 2.9 times as of 31 December 2014.
ANALYSIS OF CONSOLIDATED SALES OF THE FULL YEAR 2015
Looking at sales by region, the Americas (42.3% of total Group sales in 2015) posted an overall growth of +14.3%, with an organic change of +7.0%, a favourable exchange rate impact of +11.0% and a perimeter effect of -3.8%, driven by the termination of some distribution agreements and the sale of non-core businesses in Jamaica, partially compensated by the Forty Creek acquisition. In the US (22.1% of total Group sales and 52.1% of the region), sales registered a positive organic performance of +3.7% in 2015. Key drivers were the positive performance of Wild Turkey (mainly core bourbon), the continued double digit growth of the aperitifs (Aperoland Campari) and the Jamaican rums, as well as the strong organic growth particularly for Espolòn (+26.0%) but also Frangelico and Carolans. SKYY showed a slightly positive performance. Sales in Jamaica (5.9% of total Group sales and 13.9% of the region) registered an organic change of +2.4%, thanks to the continued positive performance of premium brands such as the Jamaican rum and Campari, benefitting from an increased focus on the core business. Importantly, this was achieved despite the negative effect of non-core sugar business. Sales in Brazil (4.2% of total Group sales and 9.8% of the region) registered an overall organic growth of +1.4%, thanks to an acceleration of sales in the fourth quarter, ahead of the excise duty increase. The Admix whiskies and Campari declined, mainly affected by the macroeconomic and category weakness. The premium brands SKYY, Aperol, Espolòn and Wild Turkey registered a positive performance. Sales in Argentina (3.1% of total Group sales and 7.3% of the region) continued to register a double-digit organic growth (+34.7%),as a result of double digit organic growth of Campari (+73.0%) and SKYY Vodka (+42.1%).Cinzano vermouth and Cynar showed good results in value terms. Sales in Canada (2.9% of total Group sales and 7.0% of the region) registered an overall organic growth of +9.7%, normalizing after the distribution change occurred at the beginning of the year. The result was also driven by the acceleration in the fourth quarter sustained by Forty Creek, Carolans, Aperol, Appleton, as well as the good progression of Wild Turkey.
Sales in Southern Europe, Middle East and Africa (31.7% of total Group sales in 2015), posted an overall growth of +4.0%, with an organic change of +1.9%, an exchange rate impact of +0.3% and a perimeter effect of +1.8%, mainly driven by the Averna acquisition. The Italian market (25.1% of total Group sales and 79.2% of the region) showed a stable performance (-0.2%) in a declining market, benefitting from a positive performance in the fourth quarter. The aperitif portfolio showed very satisfactory results: Aperol registered a continued very solid performance (+4.8%), confirmed by the very positive sell-out trend, and Campari was up by +2.9%. With respect to local high-margin brands, Crodino was up by +0.2% and Campari Soda was flattish, despite the challenging comparison base (+15.0% and +5.6% respectively in full year 2014 in Italy). The overall performance in Italy was penalised by the continued weakness in whiskies and the sparkling wines due to the weakening consumer appeal of these categories. The carbonated drinks were positive thanks to positive weather conditions. The region’s other countries (6.6% of Group net sales and 20.8% of the region) confirmed overall good organic results (+11.2%), driven by strong growth particularly in Spain (Campari, Aperol, Frangelico, Cinzano vermouth, GlenGrant and Bulldog), France (Aperol, GlenGrant, Cynar and Riccadonna), and South Africa (SKYY), partially offset by a temporary slowdown of Global Travel Retail and weakness in Nigeria (Campari).
Sales in the North, Central and Eastern Europe (18.9% of total Group sales), decreased by -5.6% overall, driven by an organic change of -3.7%, an exchange rate effect of -1.7%, as a result of the devaluation of the Russian Rouble, and a perimeter effect of -0.2%, thanks to the Averna acquisition (1) broadly offsetting the negative effect from termination of agency brands. Sales in Germany (10.0% of total Group sales and 52.7% of the region) recorded an overall organic growth of +3.2%,driven by Cinzano vermouth, Frangelico, Ouzo 12 and the agency brands that offset the weakness of Cinzano sparkling wines. Aperol stabilized in 2015, whilst Campari was weak. Russia (1.9%of total Group sales and 9.8% of the region) showed a negative organic performance (-41.4%), driven by Cinzano (sparkling wines and vermouth), Mondoro and Riccadonna, as a result of the weak macroeconomic environment and the Group’s own credit control procedures. Aperol and Wild Turkey showed encouraging results, but from a smaller base. The region’s other markets (7.1% of Group net sales and 37.5% of the region) registered an overall positive organic growth (+11.6%), mainly driven by the UK (Aperol, Campari, Cinzano vermouth, SKYY and Wild Turkey), whilst the Central and Eastern European markets were mainly driven by the aperitifs and the whiskies.
Sales in Asia Pacific (7.0% of total Group sales in 2015) increased by +7.2% overall, with an organic change of +6.4%, an exchange rate effect of +0.9% and a neutral perimeter effect. Organic performance in Australia (4.9% of total Group sales and 69.5% of the region) was positive by +6.8%, confirming the outperformance of Group’s portfolio in key categories in terms of sell-out trends, led by Wild Turkey (both core and American Honey), Wild Turkey ready-to-drink, Aperol, Campari and SKYY. The other markets (2.1% of Group net sales and 30.5% of the region) registered an overall positive organic growth of +5.4%, mainly driven by New Zealand (Coruba and Wild Turkey ready-to-drink) and Japan driven by Wild Turkey, Campari and SKYY.
Looking at sales by key brands in 2015, concerning the Global priorities, Campari registered a very positive organic growth of +6.1%. The single digit growth in Italy and the continued double digit growth in Argentina, US, Spain, Jamaica, Canada and UK more than offset the weakness in Brazil and in Germany andthe decline in Nigeria, due to macroeconomic weakness.
Aperol showed an organic increase of +11.8%, mainly driven by the positive growth achieved in Italy, boosted by continued double digit growth in high potential markets (US, France, UK and Spain), as well as in seeding markets (Eastern Europe, Australia and Brazil). Importantly, Aperol stabilized in Germany.
SKYY sales achieved a positive organic growth of +2.9%, showing a slightly positive performance in the US.The brand achieved positive results in other markets, particularly in Brazil, Argentina, Australia, UK, Spain, Mexico and South Africa.
Wild Turkey registered a positive organic change of +8.8%, driven by the very positive performance achieved in its three core markets such as US (driven by Wild Turkey bourbon), Australia (driven by American Honey) and Japan.
The Jamaican rums, including Appleton Estate, J.Wray and Wray&Nephew Overproof, achieved a very positive organic growth of +15.8%, mainly driven by the core US, Jamaica, Canada and UK, as well as Mexico.
With regards to the Regional Priorities, Cynar showed a positive organic growth (+1.7%), mainly driven by the continued positive results achieved in US, Argentina, France and Brazil.GlenGrant registered agood organic performance of +4.8%, driven by Europe (France, Germany, Spain, Sweden) as well as Australia, China and Mexico, offsetting the decline in Italy. Carolans and Frangelico increased overall by +7.7% organically. The results were positive for both brands and in particular for Carolans in core US and Canada, and for Frangelico that registered a positive progression in Spain, Germany and Australia. Espolòn registered an organic increase of +35.0%, driven by the continued double digit growth in core US market, and boosted by a strong double digit progression in all seeding markets, mainly in Russia, Eastern European markets, Australia, Mexico, Italy and Brazil.
Cinzano registered an organic change of -13.6%, entirely driven by Russia. In particular, sparkling wines were impacted by Russia and by the softness in other core markets. With respect to vermouth, the double digit growth achieved in Argentina, UK and Spain, and the positive performance in Germany were more than offset by the decline in Russia. Other sparkling wines (Riccadonna and Mondoro) decreased organically by -34.6% entirely due to core Russia. Peru, France and Chile achieved strong double digit growth.
With regards to the Local Priorities, the Italian single-serve aperitifs, Crodino and Campari Soda, registered a slightly positive performance, despite the tough comparison base in key Italian market (+15.0% and +5.6% in 2014, respectively).
The Australian range Wild Turkey ready-to-drink increased by +4.7% organically. The Brazilian brands Dreher and Sagatiba registered an overall organic change of +4.0%. Ouzo 12 showed a positive performance (+10.4%), driven by the strong growth in core German market benefitting from innovation.
 Campari, Aperol, SKYY, Wild Turkey and the Jamaican rums.
 Adjusted net income for one-off’s and tax effect from one-off’s and other non-recurring positive tax effect in FY 2015 and FY 2014.
 Acquisitions of Forty Creek Distillery Ltd. (closed on 2 June 2014) and Gruppo Averna (closed on 3 June 2014).
 Including Global Travel Retail.
 Including Wild Turkey bourbon and American Honey.
Mainly relating to provisions for restructuring initiatives in connection with Gruppo Averna acquisition, still wine business and Jamaican non-core businesses, and goodwill write-down resulting from still wine business restructuring (non-cash).
 Adjusted net income for one-off’s and tax effect from one-off’s and other non-recurring positive tax effect in FY 2015 and FY 2014.
 Acquisition of Forty Creek Distillery Ltd. closed on 2 June 2014.
 As of 1 January 2015, Gruppo Campari started direct distribution in Canada.
 Including Global Travel Retail.