Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Davide Campari-Milano NV (DVDCF, Financial) reported a positive set of results with organic net sales up 3.8%, driven by strong performance in Q2 with a 6.9% increase.
- The company experienced continued strength in aperitifs, particularly Aperol and Campari, with notable growth in the Americas and Germany.
- Espolòn showed impressive double-digit growth, contributing significantly to the company's overall performance.
- The company successfully managed to offset cost increases with pricing strategies, maintaining a balance between pricing and COGS.
- Davide Campari-Milano NV (DVDCF) demonstrated resilience in Europe despite poor weather conditions, maintaining growth in key markets like Germany and Spain.
Negative Points
- The company faced temporary headwinds due to negative sales mix effects, particularly from poor weather impacting high-margin aperitifs in Europe.
- Gross margin was negatively impacted by the fast growth of Espolòn, which is still dilutive at the gross margin level.
- There were challenges in depleting last year's high-cost inventory, affecting the company's cost structure.
- The net debt to EBITDA ratio increased to 3.5 times, reflecting higher financial leverage.
- The Asia Pacific region showed a negative performance in the first half, with a 10% decline, although improvements were noted in Q2.
Q & A Highlights
Q: Can you provide more detail on the H2 gross margin development and the impact of low agave prices?
A: Paolo Marchesini, CFO, explained that while pricing and COGS are balanced, the mix has been negatively impacted by poor weather and Espolòn's growth. The expected gross margin expansion may not be achieved, with a potential reduction of EUR20-25 million. Agave contract renegotiations are ongoing, with benefits expected in 2025.
Q: How has the recent trading trend been, particularly in July?
A: Matteo Fantacchiotti, CEO, noted that July's weather in Europe has been favorable, positively impacting sales. The trading environment remains competitive, especially in Europe, with increased promotional activities. The U.S. market remains soft, but there is hope for improvement in H2.
Q: What is the current performance of Aperol in the U.S., and how is it being built differently compared to Europe?
A: Aperol is performing well in the U.S., driven by a consistent execution strategy focusing on Aperol Spritz. The brand is built similarly to Europe, with a focus on city strategies and on-premise activations. There is ample Prosecco supply to support Aperol's growth.
Q: Can you elaborate on the impact of competition in the aperitifs space?
A: Aperol is not losing market share despite increased competition. The brand remains strong, and Campari Group is leveraging its portfolio to respond to the growing aperitifs category. The competition is fragmented, and Aperol continues to lead the market.
Q: What is the outlook for Courvoisier's contribution to net sales and margins?
A: The strategic assessment for Courvoisier is ongoing, with a relaunch planned for 2025. The brand aims to be positioned as a luxury cognac, and while specific financial contributions are not yet clear, the company is confident in its long-term potential.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
