Gruppo Campari announces 2016 first quarter results

Very positive results across all organic operating performance indicators in first quarter 2016

Operating margin accretion driven by continued positive momentum on the high-margin       

global priority brands and developed markets 
 
 

1st QUARTER 2016 RESULTS HIGHLIGHTS

  • Sales: € 327.4 million (flat, organic growth +7.2%, organic growth of Global Priorities +11.9%)

  • Contribution after A&P: € 126.7 million (+7.5%, organic growth +10.5%, 38.7% of sales)

  • EBITDA pre one-off’s: € 66.8 million (+18.8%, organic change +19.1%, 20.4% of sales)

  • EBIT pre one-off’s: € 53.9 million (+21.1%, organic change +20.3%, 21.1% of sales)

  • Group pre-tax profit: € 34.2 (-4.3%)

  • Group pre-tax profit adjusted for one-off’s: € 40.2 million (+26.1%)

  • Net financial debt: € 923.1 million (€ 825.8 million as of 31 December 2015)

     

    Milan, May 9, 2016-The Board of Directors of Davide Campari-Milano S.p.A. (Reuters CPRI.MI-Bloomberg CPR IM) approved the consolidated results for the quarter ended March 31, 2016.

     

    Bob Kunze-Concewitz, Chief Executive Officer: ‘In the first quarter of 2016 we delivered very positive results across all organic operating performance indicators. These results reflect the consistent execution of our growth strategy which is delivering a continuous improvement of the sales mix by brand and market. In particular, the positive momentum on the high-margin global priority brands continued, driving their outperformance of the Group’s overall organic growth, as well as the operating margin accretion. Moreover, we achieved a positive organic growth in all regions, particularly in the high margin developed markets, such as North America and Western Europe. However, it should also be noted that the first quarter is traditionally a small quarter and that this year our performance was impacted by some one-off drivers, positive as well as negative. On the positive side, these results benefitted overall from an earlier Easter than in 2015, as well as from some shipments phasing in the US, which will gradually reverse in the next quarters. On the negative side, the Group’s net sales performance was affected by a decline in the non-core and low margin sugar business in Jamaica due to temporary events which are not expected to reverse in the remainder of the year. Given the above, notwithstanding the very positive start to the year in the first quarter 2016, the outlook shared at the beginning of the year remains unchanged. In particular, with reference to the macroeconomic environment, we expect that the volatility in some emerging markets and the recent devaluation of the Group’s key foreign currencies will continue during 2016. At the same time, we remain confident that the Group will deliver a positive and profitable performance driven, on the one hand, by the growth of high-margin global priority brands, particularly aperitifs, American whiskies and Jamaican rums and, on the other hand, by the positive performance of the Group’s core strategic markets. We expect to continue exploiting the growth potential of our key brands and markets thanks to our consistent investments in brand building, the positive contribution from innovation, and the continued contribution of the Group’s strengthened route-to-market. Lastly, with respect to the Group’s scope, in the second half of the year the perimeter change will reflect the effects of the exclusive agreement for the worldwide distribution of the Grand Marnier spirits portfolio as well as the consolidation of the Société des Produits Marnier Lapostolle S.A. business, whose effects will vary based of the timing and the outcome of the announced Tender Offer’.

     

 

CONSOLIDATED P&L FOR THE FIRST QUARTER ENDED 31 MARCH 2016

 

 

Q1 2016€ million

Q1 2015

€ million

Reported

change

Organic

change

Forex

impact

Perimeter

impact

Net sales

327.4

327.4

0.0%

+7.2%

-3.8%

-3.4%

Contribution after A&P[1]

126.7

117.9

+7.5%

+10.5%

-1.6%

-1.4%

EBITDA pre one-offs

66.8

56.2

+18.8%

+19.1%

+2.5%

-2.9%

EBIT pre one-offs

53.9

44.5

+21.1%

+20.3%

+4.3%

-3.5%

One-off’s

(6.0)

3.9

-

 

 

 

EBITDA

60.8

60.1

+1.2%

     

EBIT

47.9

48.4

-0.9%

     

Group pre-tax profit

34.2

35.8

-4.3%

 

 

 

Group pre-tax profit adj.[2]

40.2

31.9

+26.1%

 

 

 

 

RESULTS FOR THE FIRST QUARTER OF 2016

In the first quarter of 2016 Group sales totalled 327.4 million showing a stable performance. The organic sales growth was +7.2%, mitigated by an exchange rate effect of -3.8%,as a result of the devaluation of key Group currencies, in particular the Argentine Pesos (-38.5%) and the Brazilian Real (-25.3%), as well as unfavourable trends in other Group currencies, such as the Mexican Peso and the Russian Rouble. The perimeter effect of -3.4% was driven by the combined effect of the termination of some distribution agreements and the sale of non-core businesses, in line with the Group’s divestment strategy involving non-core and low-margin businesses.

Gross profit increased by +7.8% to 179.2 million (+11.3% organic change), at 54.7% of sales.

Advertising and promotion spending (A&P) was up by +8.5% to € 52.4 million, at 16.0% of sales.

CAAP (Contribution after A&P)was up by +7.5% to 126.7 million (+10.5% organic change), at 38.7% of sales.

Structure costs, i.e. selling, general and administrative costs, decreased by -0.8%to 72.8 million, at 22.2% of sales.

EBITDA pre one-off’s was up by +18.8% to € 66.8 million (+19.1% organic change), at 20.4% of sales.

EBIT pre one-off’s increased by +21.1% to 53.9 million (+20.3% organic change), at 16.5% of sales.

Negative one-off’s of € 6.0 million mainly related to the first outlay of the SPML transaction costs (€ 2.5 million) and write off’s from asset disposals.

EBITDA reached 60.8 million, an increase of +1.2%, at 18.6% of sales.

EBIT reached 47.9 million, a decrease of -0.9%, at 14.6% of sales.

Group pre-tax profit was € 34.2 million, down by -4.3%, driven by negative one-off’s of € 6.0 million[3].

Group pre-tax profit adjusted for one-off’s was € 40.2 million, up by +26.1%[4].

As of March 31, 2016, net financial debt stood at 923.1 million (€ 825.8 million as of December 31, 2015), after the payment of initial stake of Société des Produits Marnier Lapostolle S.A. (‘SPML’) share capital (€ 125.5 million)[5], and favourable exchange rate impact of the US Dollar (€ 4.4 million). Net debt to EBITDA pro-forma ratio is 2.4 times as of 31 March 2016, up from 2.2 times as of 31 December 2015.

 

ANALYSIS OF CONSOLIDATED SALES FOR THE FIRST QUARTER OF 2016

Looking at sales by region, the Americas (41.2% of total Group sales in the first quarter 2016) posted an overall change of -6.3%, with an organic growth of +6.9%, an exchange rate impact of -6.7% and a perimeter effect of -6.4%, due to the termination of distribution agreements and the sale of non-core businesses in Jamaica. In the US (24.3% of total Group sales and 59.1% of the region), sales registered a positive organic performance of +14.8% (+8.1% excluding the positive contribution of new fill bourbon bulk sales) across the brand portfolio, with shipments running ahead of positive depletion and consumption trends and expected to reverse in the next quarters. Key drivers were the positive performance of Wild Turkey (mainly core bourbon), the Italian specialties (particularly Aperol) and the Jamaican rums (particularly Appleton Estate), as well as the strong organic growth of the Regional Brands, particularly Espolòn (+80.8%) but also GlenGrant, Cynar and Averna. SKYY grew by +2.6%, favoured by shipments phasing, expected to gradually reverse in the next quarters, while the competitive market conditions penalised depletions. Sales in Jamaica (4.7% of total Group sales and 11.4% of the region) registered an organic change of -27.8%, entirely due to the non-core sugar business (-0.4% excluding the sugar effect). The core business is showing the benefit of increased focus, with Campari growing the most, offset by a decrease in Jamaican rums, impacted by shipment phasing due to the timing of price increases. Sales in Brazil (1.7% of total Group sales and 4.2% of the region) registered an overall organic change of -27.2%, in a low seasonality quarter, reflecting the drop in consumption due to the very difficult market conditions, impacting the local brands and Campari, as well as the anticipated sales in the fourth quarter of 2015 ahead of a tax increase. The other premium brands had very positive performances, particularly Aperol, Wild Turkey and Appleton. Sales in Argentina (3.3% of total Group sales and 8.0% of the region) registered a double-digit organic growth (+87.6%),benefitting from the improved environment, with high margin premium brands growing by triple digit (Campari and Cynar doubled, SKYY Vodka and Aperol more than quintupled). Sales in Canada (2.8% of total Group sales and 6.9% of the region) registered a very positive organic growth of +14.5%, mainly driven by Forty Creek, Carolans, Frangelico and the aperitifs (Campari and Aperol). SKYY Vodka was negative while the depletions improved, on the back of on-premise activations.

Sales in Southern Europe, Middle East and Africa[6] (33.9% of total Group sales in the first quarter 2016), posted an overall growth of +3.9%, with an organic change of +4.8%, an exchange rate impact of +0.1% and a perimeter effect of -1.0%. The Italian market (26.1% of total Group sales and 77.1% of the region) registered an organic growth of +2.4%, thanks to a very satisfactory trend across the aperitif portfolio, particularly Campari (+44.0%) and Aperol (+10.5%), also benefitting from the early Easter time which magnified the overall positive consumption trend. Overall the performance was partly mitigated by the single-serve aperitifs due to the unfavourable comparison base (particularly Crodino). Averna registered a good performance, thanks to the increased focus within the Group’s sales organisation. The region’s other countries (7.8% of Group net sales and 22.9% of the region) showed overall a very positive growth (+14.0%), driven by strong growth particularly in France (Aperol, Appleton Estate, GlenGrant and Riccadonna) and South Africa (SKYY, Wild Turkey, GlenGrant and Cinzano vermouth), partially offset by the weakness in Nigeria (Campari), impacted by the prolonged socio-economic instability, and the temporary slowdown of Global Travel Retail.

Sales in the North, Central and Eastern Europe (17.9% of total Group sales in the first quarter 2016), increased by +9.8% overall, driven by an organic change of +13.3%, an exchange rate effect of -2.3% as a result of the devaluation of the Russian Rouble, and a perimeter effect of -1.2% as a result of the termination of agency brands. Sales in Germany (9.9% of total Group sales and 55.2% of the region) recorded an overall organic growth of +10.6%, in a low seasonality quarter, driven by Aperol, SKYY Vodka, Frangelico and Ouzo 12. The positive performance of Campari positively contributed to the overall growth. Russia (1.3%of total Group sales and 7.1% of the region) showed a positive organic performance (+27.7%) in a small quarter, driven by Mondoro and Cinzano (sparkling wines and vermouth) thanks to stable volumes and reduced discounts vs. a low comparison base. Market conditions continue to deteriorate due to the persisting macroeconomic instability and increasing credit risk. The region’s other markets (6.7% of Group net sales and 37.7% of the region) registered an overall positive organic growth (+14.6%), mainly driven by the UK (Aperol, Campari, Frangelico and Wild Turkey), as well as the aperitifs and the whiskies in Central and Eastern Europe.

Sales in Asia Pacific (7.1% of total Group sales in the first quarter 2016) decreased by -1.1% overall, with an organic change of +5.8%, an exchange rate effect of -6.8% and a perimeter effect of -0.1%. Organic performance in Australia (5.5% of total Group sales and 78.0% of the region) was a positive +21.5%, led by Wild Turkey, Wild Turkey ready-to-drink, Aperol, SKYY ready-to-drink and Espolòn. The phasing of the co-packing business positively contributed to the overall organic growth. The other markets (1.6% of Group net sales and 22.0% of the region) registered an overall organic change of -27.3% mainly due to Japan. In this market the positive performance of GlenGrant was more than offset by a decline in Wild Turkey and SKYY Vodka due to an order phasing effect, which is expected to reverse in the second part of the year. China was also negative due to a general economic slowdown.

Looking at the sales of Global Priority brands in the first quarter 2016, Campari registered a very positive organic growth of +21.4%. The result was driven by the very good performance in Italy, also favoured by early Easter, Argentina and Jamaica, as well as other markets such as UK, Canada and Germany. The overall performance was only partially offset by the weakness in Brazil, in a low seasonality quarter.

Aperol showed an organic increase of +24.7%, driven by the very positive results achieved across core markets (particularly Italy and Germany), as well as strong brand progression in all the high potential markets (particularly France, UK and Spain) and the seeding ones (particularly US, Australia, Brazil, Chile and Global Travel Retail).

SKYY sales achieved a positive organic growth of +5.9%, mainly driven by the core US market (+2.6%), thanks to shipment phasing, expected to reverse in the next quarters. Italy, Germany and Argentina showed very good results. These results more than offset the weakness in China and Brazil.

Wild Turkey registered a positive organic change of +1.9%, driven by the very satisfactory results achieved in core US (driven by Wild Turkey bourbon and American Honey) and Australian market (driven by Wild Turkey bourbon), compensating the shipment phasing in Japan.

The Jamaican rums, including Appleton Estate, J.Wray and Wray&Nephew Overproof, showed a positive organic growth of +1.6%, that was overall impacted by the tough comparison base (+19.6% in the first quarter 2015). The performance was mainly driven by the core US (+9.4%, particularly Appleton Estate)and UK (+11.2%, particularly Wray&Nephew Overproof), while Jamaica was negatively impacted by a shipment phasing due to the timing of price increases.

With regards to the Regional Priorities, Cynar showed an overall good organic result (+10.9%), mainly driven by the continued positive results achieved in Italy, the US, and Argentina. Averna and Braulio showed overall very good results (+61.6%), driven by core Italy, Germany and US, benefitting from the increased focus within the Group’s sales organisation. GlenGrant registered agood organic performance of +28.5%, mainly driven by France and the US. Forty Creek registered soft results (-3.7%), showing a good performance in Canada that was more than offset by weak shipments in the US. Carolans showed an organic increase of +6.8%, driven by the very good results achieved in Canada, and Frangelico increased by +9.7% organically, thanks to an excellent progression in Germany. Espolòn showed an organic increase of +67.6%, driven by the continued strong double digit growth in the core US market, and in new markets, thanks to the successful brand building initiatives (particularly Australia, Brazil and Italy). Cinzano registered an overall organic change of +5.3%. In particular, sparkling wines showed a positive performance in Germany and Russia, but were negatively impacted by the softness in Italy. With regards to vermouth, the positive performance was driven by Argentina, Russia and South Africa.Other sparkling wines (Riccadonna and Mondoro) increased organically by +64.1%, attributable to the strong growth in France (particularly Riccadonna) and the recovery in Russia (particularly Mondoro).

With regards to the Local Priorities, in the Italian single-serve aperitifs, Campari Soda was slightly negative (-3.7%), while Crodino registered a negative organic change (-13.6%), due to the challenging comparison base in Italy (+16.2% in first quarter 2015). The Australian Wild Turkey ready-to-drink range grew by +12.1% organically. The Brazilian brands Dreher and Sagatiba registered an overall organic decline of -27.3%. Ouzo 12 showed a positive performance (+13.8%), driven by the strong growth in the core German market.



[1] EBIT before SG&A.

[2] Group pre-tax profit adjusted for negative one-off’s of € (6.0) million in Q1 2016 and positive one-off’s of € 3.9 million in Q1 2015.

[3] Mainly related to the first outlay of SPML transaction costs (€ 2.5 million) and write off’s from asset disposals.

[4] Group pre-tax profit adjusted for negative one-off’sof € (6.0) million in first quarter 2016 and positive one-off’s of € 3.9 million in first quarter 2015.

[5] Initial acquisition of shares, corresponding to 17.19% in full ownership, 1.06% in bare ownership and 1.54% in usufruct of SPML’s capital, as part of the agreement reached by the Group on 15 March 2016, with the controlling family shareholders of SPML to acquire control of the company, owner of Grand Marnier. Pursuant to the terms of the agreements, Gruppo Campari is launching a friendly takeover offer for the remaining shares of SPML. Simultaneously to the acquisition of the initial stake in SPML, Gruppo Campari has entered into an exclusive agreement with the target company for the worldwide distribution of the Grand Marnier spirits portfolio starting from 1 July 2016. The correspondent Equity Value for 100% of SPML’s share capital is € 684 million and the Enterprise Value for 100% of SPML’s share capital is € 652 million.

[6] Including Global Travel Retail.

Publishing date: 
09 May 2016
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Last updated May 09 2016