Davide Campari-Milano N.V.

Good afternoon. This is the Coral School Conference operator. Welcome and thank you for joining the presentation of COMPARI's first quarter 2024 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Matteo Fantacchiotti, CEO of Campari. Please, go ahead, sir.

Thank you very much, and good morning, afternoon, and evening, everyone, and thank you very much for joining us. Very pleased to lead this first 2024 performance update and first quarter results presentation, together with Paolo, of course, and the investor relations team here in the room with us. So going straight into it, organic sales were up plus 0.2% with solid underlying trends against a top comparison base due to temporary phasing effect in Q1 2023 from trade forward buying ahead of price increases. As a reminder, we drew Q1 2023 around plus 20%. So overall, we observe continuous strength in aperitifs led by Campari and Aperol, despite the challenging conveys, and largely thanks to core European markets and U.S., while Espolon, also in the U.S., continues to show very solid momentum. If we exclude the temporary positive phasing effect in Q1 2023, which was mainly impacting the U.S. and Italy in aperitif and espalon, the organic growth will came at approximately plus 6%. EBIT adjusted organic is at minus 2.3% and margin at 22.8, which is a dilution of 60 basis point versus Q1 2023 with some diluting effect of HGNA due to flattishness growth. Excluding the temporary positive phasing effect into 1.23, the EBIT adjusted organic growth will be at approximately plus 13%. Growth margin is flat, plus 0.2%, neutral on margin with some carryover effect of last year pricing quizzes, offsetting the expected COGS headwinds due to the carryforward production stock effect we disclosed in our last call. AMP is minus 1.6%, generating 20 bits accretion due to some AMP investment phasing. And SG&A at plus 4.2%, generating 80 bits margin dilution due to a softer top-line growth with ongoing investment, as you know, in route to market and commercial capabilities. So our outlook remains unchanged. Since last time we spoke, which was only a couple of months ago, not much changed indeed. So I would say that the key message is probably no news, which I guess in our case is good news, as we continue to outperform the category in all key geographies and we progressively have easier comps as we go into second half of the year. And probably the only one change which was somehow expected, but it's now finally done, is that we are now officially proud owners of a beautiful cognac maison, which is Courvoisier. So going to the next chart and looking at performance by regions and portfolios. Both American and Europe performed in line with expectations with very high con base and were winning market share, mostly led by aperitif and tequila. Now, important to explain the APAC numbers. As a matter of fact, we're discounting a couple of important factors. Number one, a route to market change, both in China and India, which happened in Q1 in both cases. and we expect to start to see much more positive trends on both markets, starting from, I would say, second half of Q2. And then a phasing effect in Korea, where we had a material difference in opening stock this year, driven by a soft Q4 in 2022, driven by market macroeconomics and trade environment growth. Without those, Asia-Pacific will be still growing and we're still positive for the full year outlook for the region to maintain a positive growth trajectory on a full year basis. At the same time, it's great to see our global priority brands are growing even against the high conveys that demonstrate the momentum again on Aperitif and Espolon. So quickly, deep diving into the regions in the next chart, looking at America. When it comes to U.S., classic shipment performance against the Tafcon Bay. So Q1 last year was up 23%. But again, positive growth for Espolon, Aperol, and also Grand Marnier. Although Grand Marnier, there was also a positive impact of low conveys last year coming from this stocking and some weakness in sky. But overall, I'm sure there will be questions. You will see that our share performance momentum in U.S. continue, especially driven by APRO and Espolon. Jamaica is negative, but I would say Jamaica is more of a supply story. We'll be happy to explain. Yes, we had a high conveys, but the number is negative because of some temporary shortages, while the underlying consumption trends are positive. And as you know, we're addressing supply shortages with the CapEx investment we did in Jamaica. And some good numbers coming up from other markets, especially driven by Brazil, both from aperitifs and the local Brazilian brands. And Canada with, again, Afro and Espolon doing particularly well. Moving to the next chart, going into EMEA, again, a positive growth, 2.2%. And this is, I would say, share performance, generally positive everywhere. and especially in the data available in the Easter readings, also generally very positive, mostly driven by operatives across markets. And when it comes to the organic sales growth numbers, Italy, in a small quarter, is declining against a very high con base. In fact, last year, Q1 was up 21.6%. where we had price increases in early Easter, which was also early this year, but obviously in 2023 against 2022 was way earlier. And especially April was Q1 up 33%. Germany, very good growth, double digit, also against a comp base. With April aperitifs, it's Sarti Rosa, which is our innovation, doing particularly well, and also Crodino, which is nice to see. France is growing well. UK is a combination of, again, icon-based, but also is another market that is temporarily impacted by supply constraints in Jamaican realms. And other markets, generally speaking, doing well across Austria, Spain, Netherlands, and Belgium. Again, mostly an operative story, although some of the other brands are also growing. But as you know, in Europe, from a smaller comp base. Moving to Asia-Pacific. So Asia-Pacific, actually, the story is twofold. On one side, we still continue to see a very positive trend across most APAC markets. It's part of our APAC growth story, where in markets like Japan, New Zealand, Korea, our depletions are growing double digits. We're doing well. We're winning market share. As expected, we were planning to change route to market in China, and I think that's a positive news, as it gives the sign that we have real confidence in this market, and we believe that, as we learned over the last two, three years, we are ready to go on our own, even more now with the addition of a cognac like Revozier in our portfolio. And also we did change both management and route to market in India. So Q1 for India and China was almost close to very little sales ahead of the route to market changes and stopped moving from old route to market partners to the new ones. So I will say Asia is positive. The one market that is really struggling at the moment is Australia, where first the macro environment is challenging from a macroeconomic standpoint in the country. And the competitive set, especially in terms of category mix, is really not playing in our favor. And we're struggling a little bit in barbon, especially RTDs. where widespread RTDs are going much faster. And within Barbon RTDs, we took quite some price over the last couple of years. And we're at the moment seeing a lot of promo pressure going and we're losing a bit of share in Barbon. And this is the only performance issue that I will call out on EPAC. So for the full year, we remain positive that this region will still deliver growth as in line, especially in the key priority markets with previous trends. Moving to brands, global priorities, like I said, very nice to see that both April and Campari are still growing, even against very high conveys, both at plus 6%, which means actually the brands are doing really well across most of the key markets, be it You know, Germany, U.S., France, for April, and most of the others also for Campari. Espolon, double-digit growth, again, besides a very high comp base. which shows the real momentum for this brand, which seems really unstoppable, both in the U.S. and also in the international market that now we can finally activate as we are unconstrained. White Turkey is a bit down, and I will call out two things here. Number one, also, we need to acknowledge that when it comes to White Turkey, this brand is 71% bigger than it was in 2019. So this is a brand we really developed a lot. And number two, as we discussed in the past, our strategy on Wild Turkey is really value over volume and have to deep dive. But besides the icon base and I'm going to repeat this for most brands again, there is some temporary phasing for some some of the non-U.S. markets like South Korea and even even Japan. But also our strategy in action of volume versus value. So the priority SKUs of Wild Turkey, the one we want to grow for the future, which is one on one and above, are all growing and winning share, which is what we care about. Jamaican rum, as I said, is mostly a phasing problem, but it's nice to see that Appleton is in great shape and it's winning share also in U.S. Grand Marnier is growing, although you will see it later on. We're investing on the brand. We're doing well. But this number at plus 8% has also some easy con base after the stocking last year in U.S., Sky is the one that, as you know, vodka is having a bit of a tough time in the U.S. We keep share. Actually, in the last quarter, we gained a little bit of share, but the category is under pressure in the U.S., although Sky is growing in other international markets. which now account for a good proportion of the volumes. And we're pleased to see that positive trend, especially after the new packaging launch some 12, 18 months ago. Moving to regional and local priorities, I will not dwell again on commenting on the high-con basis, but basically I will just summarize very quickly, saying that sparkling wines and champagne is doing well, and this is obviously a reflection of sparkling wines. As you know, for us, it's very much linked with Apple Performance, and champagne, we're building nicely our L'Allier brand. Whiskey, especially when it comes to Plain Grant, is more of a phasing. And to mention Cordino, which is something we are starting to invest outside of Italy to activate our non-alcoholic spritz offering, and it's starting to perform really well. And when it comes to local priorities, I will say everything is in line with our expectation. And the one single thing to flag is White Hockey RTD, which we discussed already. But the rest is performing okay. Before we go into the financials, a few snapshots of last quarter activations, which was, as always, quite active. And I think they represent, again, I would say, our proprietary beautiful marketing model in action. First of all, April of Australia opened. 2024 marked the return of April as the official operative of the Australian Open after a few years break due to COVID. And when you look at some of the buzzwords we always use in the industry, like omni-channel and consumer or shopper journey, I think our tennis program was a clear example of those buzzwords really in action. Like, if you happen to be in Melbourne during the Australian Open, you could get TO THE ICONIC ROAD LABOR ARENA BY OUR BRANDED APRIL BOATS THAT YOU CAN SEE IN THE PICTURES. YOU COULD WALK AND ENJOY A REFESHING APRIL SPREAD WALKING ALONG THE RIVER IN SOME OF OUR ACTIVATION IN THE BARS AND TERRACES ALONG THE RIVER. IN THE PRECINCT AROUND INSIDE THE ARENA WE HAD an immersive Aperol experience with 300 square meters terrazza Aperol. You could also this year, which was a novelty, order Aperol sprees at the bar inside the tennis centers. So you could sip an Aperol sprees watching world-class tennis. And then we had activation also outside of the arena in on and off spaces. So Uber activation with some approach for an open partnership inviting to visit some of our on-premise activation. We had off-premise installation with limited editions for Australian Open. We had pop-up stores at the airport in Melbourne, and then a nice above-the-line campaign across digital, social, programmatic, and linear TV with a dedicated campaign for April, which was called Serve Up Summer. So a beautiful 360 campaign, which delivered very strong results, and April is going double-digit in Australia. Going to the next chart, while it was summer in Australia, it was winter on this side of the world, and we did our de-seasonization program with beautiful activations in ski resorts, alongside also World Cup ski events. And for me, honestly, being back in Europe for Christmas this year, I was also excited myself to start to see apparels, which is popping up over lunchtime on the slopes everywhere. So it is really good to see how we're activating apparel also in wintertime now in Europe. Next page is Grand Marnier, which I think is also an interesting novelty because, as you know, we keep cementing the iconic and statusful brand positioning for Grand Marnier, winning in Margarita and expanding also its consumption versatility. And lately, knowing the black American consumers, which have high spending power, so our correct target for Grand Marnier and high cultural influence in U.S., are moving in between cognac and tequila. And as you know, Grand Marnier is a cognac-based liqueur. We identified an opportunity to connect with these consumers by way of hip-hop as an affinity territory. And February 2024 was the first time we stepped into this strategy. And so resounding results as Grand Marnier took its place in the cultural conversation during Grammys weekend, Super Bowl, and NBA All-Star weekend with incredible results. I can just give you one, which is... In one month, we earned over 1.7 billion PR impressions, which exceeds total full year last year. So very promising start of this platform for Grand Marnier. Next page, basically we keep executing Campari association with cinema, and this February was in Spain, both at Goya Awards and with our partnership with Fotogramas de Plata, which is the country's premier cinema magazine. and sponsoring the Campari Cinema Award at the event in February, which is a very nice anticipation of what we will do very shortly at the 2024 Cannes Film Festival. We will also launch, it was announced yesterday, our dedicated campaign, which is mostly digital. We are cinema for Campari. Last but not least, a quick mention of our Tequila portfolio in the next chart, because obviously, like I said, Expolon is really shining. It's now part of the global priority brand cluster, combining strong U.S. presence and unconstrained volumes for internationalization opportunities. And in Q1 2024, Espolon has been growing share and value and volume double digit in most markets. And by the way, this year is worth reminding that the brand is celebrating 25 years since the introduction of its signature Tequila Blanco. And we're launching a limited edition, which you can see in this chart. First of its kind for the brand, created by renowned Mexican street artist and illustrator Edgar Saner Flores. And we will dip down in Q2 in terms of what we will do beyond the limited edition bottle for this milestone anniversary with a series of underground events, partnership, and experiences as always amplified through digital and through consumers doing the amplification for us. And our other Mexican gens, by the way, continue to shine, and they just won several awards, as you can see in the chart. both in terms of tequila and mezcal with Monte Lobos at the San Francisco World Spirit Competition. Last but not least, because it just came a few days ago, is the Cocktail Report 2024 by Dreams International. It's finally out, and we have great news to share with you. Because for the third year in a row, Negroni is confirmed as the number one best-selling cocktail globally, and obviously featuring Campari, because there is no Negroni without Campari. And as you know, this is one of the most followed report by bartenders and trade influencers. Therefore, the number one position for Negroni is an important recognition that we should continue to leverage with Campari. This being said, additionally, Aperol Spritz is moving up one place from nine to eight position and is the one single branded cocktail in the world. I mean, you can argue Negroni is also branded, but with Aperol Spritz is even in the name of the cocktail. And the other thing we were very pleased to see is that, as you know, for us, The strategy with Espolon was, of course, to participate into Margarita, but from the very beginning to push a more sessionable drink, we believe, be the Paloma with our Espoloma. And now the Paloma moves up four places and is in the top 10. So we believe we can also leverage this platform as we did since the very beginning, and now we can ride on these trends. So I think that summarizes our marketing activation and numbers, and I will let Paolo to bridge with some Courvoisier information and financials.

If you follow me to page 15, as you can see, on the 30th of April, we've announced the closing of the Courvoisier acquisition. after having successfully completed the various applicable regulatory processes, including the antitrust one. The upfront enterprise value is confirmed at $1.2 billion, including within the enterprise value $410 million of maturing inventory. Should the earner be paid in 2029, the total enterprise value is therefore confirmed at 1.32 billion dollars, equivalent of 1.22 billion euros. The integration of the Kubernetes operations has been initiated, including supply chain, back-office, and distribution. We expect, you know, quite a smooth end over given the successful pre-closing achievements of our clean team and the positive contribution of the sellers team. The brand strategic assessment is currently underway. Meanwhile, the commercial structure strengthening in core brands and regions, namely the US and UK, is already started. The perimeter is expected to start reflecting the consolidation of Courvoisier from closing with limited impact expected in the first transition year. So here we confirm the 10 million Euro contribution from the acquisition. If you follow me to page 16, we can see that the EBIT adjusted organic change came in at a negative 2.3%. with a margin, EBIT adjusted margin of 22.8%, showing a 60 basis point organic change, negative organic change. Organically, the gross profit was flattish, plus 0.2%, thus neutral on margin, as pricing and positive sales mix fully offset the expected first quarter COX headwinds. The NP in value was negative by 1.6%, generating 20 basis point margin accretion, totally due to phasing of our NP budget. The SG&A increased in value by 4.2%, generating 80 basis point margin dilution due to the softer top line growth with ongoing investments. If we excluded the temporary phasing effects of the first quarter, the EBIT adjusted organic growth would be, as we said before, 13% still with a flat gross margin. The EBIT adjusted on a reported basis came in with a negative value change of 4.9%. with a negative perimeter effect of 0.2% due to the net effects of the changes in the agency brand portfolio. The effects had a negative impact in value of 2.4%, and that was mainly driven by the revaluation of the Mexican pesos versus both the dollar and the euro. The bid adjusted came in at 181 million euros with a reported growth of a negative 1.7%, of which 0.6% is a positive organic growth, a negative 0.2% perimeter effect, and again a negative 2.1% FX effect. If we move on to the following page, we can see that operating adjustments came in at €2.2 million negative, mainly attributable to provisions linked to restructuring initiatives. The total financial expenses came in at €11.9 million, with a decrease of €4.3 million versus a year ago. If we excluded the exchange rate effects, the net financial expenses were down to 12.1 million euros versus 12.9 million euros of first quarter of last year, within which we have 25.8 million euros of inter-expenses, including the incremental interest on the convertible bond issued in the first quarter to finance the acquisition. And those, you know, 25.8 million euros were partly offset by, you know, 13.8 million positive contribution from interest income on the resulting cash position ahead of the closing of the Courvoisier acquisition. The cost of net debt came in at 3.1% versus 3.3% of first quarter of last year. The exchange gain came in at €0.2 million versus an exchange loss of €3.3 million over the first quarter of last year, with benefits from low volatility in exchange rates. The hyperinflation effects due to Argentina came in at a positive €8.1 million. Pre-tax profit adjusted came in at 146.5 million euros, up 3.7%. Pre-tax of 144.3 million, up 6.4%. Post non-controlling interest before taxation, the group pre-tax profit adjusted came in at 147.3 million euros, up 5.8%. The group pre-tax profit came in at 145 million, up 8.6%. Moving on to page 18, as you can see, the net financial debt stood at 1,315.3 million euros with a decrease of 538 million euros versus December last year, mainly driven by the cash injection from the equity raise and the convertible bond, which were carried out in January this year to finance the Kuvazi acquisition. Those, you know, positive, you know, effects were partly offset by an increase in gross debt to the convertible bond, which here we could recognize net of the equity, of its equity component. The net debt would be adjusted at March end, came in at 1.8 times versus 2.5 times the back end of last year. But, you know, if we factor in the negative effect of the Payment of the covers a consideration. The net that would be the ratio would be 3.5 times still excluding the positive panel effect of the first time consolidation of was here. So it's you know the more prudent. I think you know my mother. This is it on numbers. I would end back to you for conclusion and outlook.