Campari Group

The Board of Directors of Davide Campari-Milano S.p.A. has approved the quarterly report as at 30 September 2005. The Group’s consolidated results for the first nine months of 2005, prepared according to IAS / IFRS accounting standards, were positive and showed growth in sales and at all levels of profitability compared to the same period last year.

CONSOLIDATED RESULTS FOR THE FIRST NINE MONTHS OF 2005
In the first nine months of 2005, Group sales totalled € 543.3 million, an increase of 3.3% (+3.4% at constant exchange rates).Note that with the introduction of new international accounting standards, the Campari Group, in line with the practices of the main international operators in the spirits and wines sector, has adopted a strict interpretation of IAS 18 in relation to expenses that may be classed as discounts in calculating its revenues. According to the standard interpretation, trade allowances have been reclassified as discounts, and therefore have a direct impact on net sales.The overall change in consolidated sales, shown in accordance with the new interpretation, resulted from organic growth of 2.2% and a negative exchange rate effect of 0.1%. External growth of 1.1% came from sales of third-party brands that the Group has begun distributing (Jack Daniel’s and other Brown-Forman brands on the Italian market, and to a lesser extent, Martin Miller’s gin in the US).

Trading profit increased by 3.1% to € 158.6 million (+4.2% at constant exchange rates), or 29.2% of sales.

EBITDA before one-off’s increased by 4.3% (+5.8% at constant exchange rates) to € 132.4 million, or 24.4% of sales.
EBITDA rose by 5.8% (+7.3% at constant exchange rates) to € 135.9 million, or 25.0% of sales.
EBIT before one-off’s went up by 4.5% (+6.4% at constant exchange rates) to € 119.5 million, or 22.0% of sales.
EBIT increased by 6.4% (+8.2% at constant exchange rates) to € 123.1 million, or 22.7% of sales.

With regard to depreciation and amortisation, please note that following the adoption of IAS / IFRS, the amortisation of intangible assets no longer includes goodwill and trademark amortisation.

The Group’s pre-tax profit was € 112.8 million, an increase of 16.8% (+18.5% at constant exchange rates).

At 30 September 2005, net debt stood at € 327.5 million (€ 355.8 million at 30 June 2005).

SALES IN THE FIRST NINE MONTHS OF 2005
The spirits segment, which accounts for 66.0% of total sales, recorded growth of 4.8%, the combination of organic growth of 3.1% and external growth of 1.7%. The Campari brand grew by 1.1% at constant exchange rates (+1.7% at actual exchange rates). Sales of SKYY Vodka, including the flavoured lines, rose by 8.8% at constant exchange rates (+5.8% at actual exchange rates), thanks to a positive performance in both the US (+6.2% at constant exchange rates) and international markets (over 30% approximately, at constant exchange rates). Regarding the other main brands, the spirits segment benefited from strong performances from Aperol (+19.2%), Cynar (+19.4% at constant exchange rates), the Brazilian brands (+4.0% at constant exchange rates) and Zedda Piras liqueurs (+4.6%). Sales of CampariSoda and Ouzo 12 declined by 1.8% and 3.1% at constant exchange rates respectively. Of the brands under licence, 1800 tequila performed well (+12.2% at constant exchange rates).

The wines segment, which accounts for 13.9% of total sales, recorded growth of 5.9%, resulting from organic growth of 6.5% and a negative exchange rate effect of 0.6%. The positive performance of the business was driven by sales of Cinzano vermouth, which grew by 15.0% at constant exchange rates, thanks to a good showing in Italy and other major European markets. Sales of Cinzano sparkling wines rose by 3.3% at constant exchange rates. Sales of wines were also supported by a sound performance from Riccadonna (+32.1% at constant exchange rates) and Mondoro (+15.3% at constant exchange rates), while sales of Sella & Mosca were substantially flat.

Soft drink sales, 19.0% of total sales, recorded almost entirely on the Italian market, fell by 2.1%. The solid performance of Crodino (+3.3%) was offset by a disappointing performance of the less profitable Lipton Ice Tea (-11.3%). Sales of the Lemonsoda, Oransoda and Pelmosoda range, thanks to a good third quarter, remained broadly stable compared to last year (-0.1%).

Looking now at results by region, sales on the Italian market, which accounts for 48.8% of total Group sales, recorded a modest increase of 0.3% in the first nine months of 2005. The Italian business benefited from a positive contribution from external growth (+1.9%), as the Group began distributing Jack Daniel’s and other Brown-Forman brands. In contrast, the decline in organic growth was entirely due to the poor performance of Campari Mixx and Lipton Ice Tea, two low-margin products. The Group’s core business, however, was boosted by strong sales of Aperol, Campari, Crodino and Cinzano vermouth. Sales in Europe (18.6% of consolidated sales) grew by 5.8%, thanks to the strong performance in Germany, Switzerland and other major European markets. In the Americas, which account for 28.0% of total sales, organic growth of 5.0% at constant exchange rates was recorded on the US market (2.3% at actual exchange rates). Sales in Brazil rose by 5.0% at constant exchange rates (+20.8% at actual exchange rates). Sales to the rest of the world, which include duty free sales and account for 4.7% of the total, posted organic growth of 11.3% at constant exchange rates. This result was boosted in particular by a positive performance on the Australian and New Zealand markets.