Davide Campari-Milano N.V.

Good evening, this is the Conosco Conference Operator. Welcome and thank you for joining the Campari Group First Half 2025 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 Simon Hunt, CEO, and Paolo Marchesini, CFO of Campari. Please go ahead.

Thank you very much. Good evening, good afternoon to everyone. Thank you for joining us to go through our 2025 half-year results and the perspectives for the remainder of the year. As always, Paolo is here with me, along with our AI team. Chiara and Gulsi are happy to connect after the call to further deep dive with all of you in the upcoming days as necessary. Now, a short summary of our results. You can see that the progress is in line with what we told you last time. Our outperformance in sellout is continuing on track across most geographies with further improvements in Q2, supported by a positive start to the peak season. The better weather has played a role, but at the same time, our increased focus on execution and brand building investments are also starting to pay off. Top-line trend is on track with growth in Q2 as guided, and we'll dive into details later on. Profitability is on track, driven by initial savings in SG&A and gross margin accretion, while A&P remains diluted due to the front-loading of peak season investments as expected. Cash generation is on track with positive free cash flow despite the continuation of our extraordinary CapEx program. And a few details on our key focus areas where we are progressing in line with our expectations. On cost, there's a visible deceleration in SG&A trend. As we previously guided, the majority of the benefits will be released in the second half to reach our 50-bit secretion target on a like-for-like basis in 2025. On brand building investments, we're not making any compromises. Instead, we're using this period where the sector is under pressure to accelerate investments with a focus on effective spend. On CapEx, we're on track to complete our extraordinary program for production capacity expansion by the end of this year. As I've already mentioned in the past, balance sheet discipline is critical for us, and the improvement in our leverage ratio is on track. The closing of the Chinzano disposal, which represents a significant advancement in portfolio streamlining, will lead to further reduction of net debt and additional slight improvement in the ratio. And at the same time, we are maintaining our pause on M&A. In terms of portfolio, geographic expansion of our brands is on track. Utilizing our existing footprint of 27 in-market companies, we keep growing. For example, in Q2, more than 13 of our markets recorded double-digit growth. While growing, we continue to focus on the quality of our commercial execution and maintaining pricing discipline despite the challenging backdrop. Our aim is to ensure consistency, and these set of results are a testament to this. Now let's look at our top-line performance and drivers. In H1, we delivered a resilient performance with flattish organic top line growth. There was a marked improvement in Q2 across almost all houses and main regions with a total organic growth of plus 3.5%, of which plus 2% was underlying. The main drivers of Q2 top line were due to a positive start to the peak season, despite the ongoing challenging backdrop as seen in our sellout data outperformance. We had the recovery of the 10 million Easter timing impact from Q1. We had the recovery of a portion of the 11 million US logistics delay impact from Q1, with the rest to be recovered in the remainder of the year. We also had the inclusion of Corvoisier into organic as of May. And we had the negative impact of one German retailer delisting because we would not move on price. impacting us by 5 million euros in the first half and expected to be another 6 million in the second half. Perimeter and FX impact largely offset each other in the first half to lead to a total reported top-line growth of plus 0.3%. Now, moving on to sell-out data, which is ultimately the main focus, our outperformance continued across almost all markets with acceleration at the start of peak season in Q2. In the U.S., our outperformance accelerated in the strategic on-premise channel in Q2 with plus 5% growth versus the sector of negative 2. In NABCA, Q2 was plus 1 compared to negative 3 in the sector. On the off-premise, while our brands continue to grow positively, the rest of the portfolio, which has a higher weight in this channel, impacted our total growth. In general, across channels, our key focus brands, Espelon and the Aperites, drove solid growth ahead of the market. In EMEA, we also outperformed or were in line across all markets, with our total performance plus 1% versus a market of negative 2, again with acceleration in Q2. The UK, France, and Italy all saw accelerations. In Germany, where the overall market is under pressure, we also have the impact of the delisting that I mentioned earlier. But we have some brands like Sati Rosa, Credino, and Apoel Spritz, which continue to grow strongly and bring in new consumers into our franchise, especially in new occasions. Let's now look at the top-line growth by region, starting with the Americas. The organic change in the Americas was minus 1% in the first half, with an improving trend of Q2 of plus 4%, driven by the U.S. and across other countries. In the U.S., following the impacts in Q1, we had a positive performance in Q2 of plus 3% growth on steady days of inventory. Q2 was driven by double-digit growth in both Espelon at plus 11% and the Aperites at plus 10%. And this was partially offset by persisting challenges in Skye and a high base in Grand Marnier. Jamaica recorded negative 2 change in the first half with a negative 8 in Q2, impacted by a high comparison base of plus 32% last year. At the same time, the local market dynamics are very positive and supportive of the core Ray and Nephew overproof rum and Magnum tonic wines. And thanks to the completion of the Dunderwater treatment facility within 2025, we expect to have increased capacity and increased resilience against potential weather events starting from 2026. The rest of the Americas, which makes up about 11% of our group sales, continued its solid performance, especially in Q2, with plus 12% growth mainly driven by Aperol, Sky, and the Brazilian brand. Now, moving on to EMEA, we recorded plus 1% growth outperforming the market, mainly driven by our core aperitif business in the UK, France, and the rest of EMEA. In Italy, we had a resilient performance with a negative 1% change in Q2, outperforming the challenging market, with consumers remaining conservative in terms of discretionary spend. Aperol and Campari had a flat trend, while Crudino, Aperol Spritz, and Satyrosa grew, benefiting from convenience trends and our portfolio approach. The brand health of our portfolio remains strong, and we continue to reinforce the franchise in Italy with increased activations, as we'll show you in the rest of the presentation. In Germany, we saw a moderation in the performance with Q2 change of minus 2%. Here, we recognize the market backdrop is challenging. We have a high comparison base as well. Plus, as I said, during the European alliance negotiations, while overall very successful, we did have to forego one retailer to hold the line on pricing. Excluding this impact, Q2 growth would have been plus 4% and the first half negative one, with most of the impact coming from Aperol. On a positive note, Satyarosa is now contributing 9% of sales, and it continues to grow very strongly. This brand, which has only been in Germany until this year, is now being rolled out to other countries like Italy, following strong pilot tests, and we'll share more about this in the future as part of our broader Aperites play. In France, the environment remains subdued, but our performance is accelerating, with plus 3% growth in Q2, mainly driven by Aperites. The UK performance remains solid. We registered double-digit underlying growth, driven mainly by Aperol and Aperol Spritz, as well as Courvoisier benefiting from a new marketing campaign that I'm sure many of you will have seen in London. In the other countries in EMEA, which contribute 16% of our overall sales, there's an acceleration to double-digit growth in Q2, driven by almost all countries, especially global travel retail, Greece, and Belgium. And the bulk of growth is coming from Aperitif and Courvoisier. Moving on to APAC, our growth was plus 4% in the first half. In Australia, we had a plus 10% growth in the first half, and it was driven by market outperformance in Aperitif with ongoing focus on accelerating on-premise activations, as well as the Esplanade bottle and RTD, which is now the number one among tequila RTDs. While Turkey, Bottle and RCD also contributed off an easy comparison base. And you don't see it on the page, but also the sellout data confirms the trends with solid growth, especially driven by Aperol, which grew 24% in the first half. In the rest of APAC, we saw resilient trends in Japan, South Korea, China and New Zealand, benefiting from increased focus on direct markets. offset by negative trends in other markets where we don't have a direct presence. This is a region where we've recently made route-to-market investments, as you know, and we will progressively see the benefits in the upcoming periods. Okay, so let's move to looking at the houses, and let's start with the house of properties. Here we recorded a plus 2% growth in the first half with an improving trend heading into the peak seasons. Apple recorded an improving trend in Q2, supported by growth in both the Americas and EMEA. And if we look at H1 growth, it was mainly driven by the Americas at plus 8%, with a small positive in the U.S., and strong trend in the rest of the region. In EMEA, there was a stable trend. Italy was flat, while Germany got impacted by the delisting. The rest of EMEA recorded plus 3% growth, mainly due to the U.K., Greece, and other markets. For Campari, the trend was impacted by the high comparison base in Brazil, despite a plus 8% growth in the U.S. and plus 1% in EMEA. Italy remained flat with recovery in Q2, while Germany again was impacted, but the rest of EMEA trended positively with plus 6% growth driven by acceleration of the Spritz trend. For the remainder of the Aperitif portfolio, there was solid acceleration in Credino, with resilient performances across EMEA, including Italy. Aperol Spritz has also started to gain traction on the back of the convenience trends, as consumers expand their consumption into new occasions. Other Aperitif brands, especially Satirosa, continue to grow nicely and support our leadership position in the Aperitif category. We also wanted to quickly share the sell-out performance of Aperol in this period. In the US, the strong trajectory is continuing in the strategic on-premise as well as in NABCA. Also in the UK and France, we had a strong outperformance with plus 13% and plus 17% growth respectively in Q2 in a muted market backdrop. Italy is growing in line with the category of a higher base and with encouraging performance in the early peak season. In Germany, the decline is higher than the category but off a very high comparison base for the prior year and for the reasons I've already explained. Overall, we're encouraged by the improving trend in early peak season. The weather has been far more supportive this year, and it seems to be continuing in Q3 so far. As I mentioned before, we continue to see double-digit growth in smaller markets across the world, giving us confidence in the geographic expansion opportunities. OK, in whiskey, the ongoing soft trend in the core US offset the resilient performance in APAC, especially in core Australia and South Korea, as well as EMEA off a small base. Russell's Reserve has been impacted by product shortages due to the strong demand on selected premium variants in this period as its popularity continues. The positive trend in Jamaican rums continued in Q2 with plus 5% growth despite the high comparison base as we cycle the volatility that the hurricane caused last year. This is driven especially by Ray and Nephew Overproof with ongoing strong underlying momentum. Having just seen the business on the ground in Jamaica and talked to many counterparts in government and in the trade, it's clear that this brand is truly part of the DNA of the country. In the House of Agave, there was an improving trend in Espelon in its core US market. including recovery of the Q1 logistics delay impact, leading to solid plus 12% growth in Q2. Growth was supported by Blanco, plus four, and especially by Repo, a plus 14 in the first half. And key seeding markets also continued to grow off a small base, in line with our international expansion plan. Within the House of Cognac and Champagne, the ongoing negative performance in Grand Marnier was driven by the core U.S. market of a high comparison base. We were plus 20% for the first half last year. And it was impacted by Q1D stocking and our focus on pricing in a highly competitive market to protect brand equity. The on-premise, which is core for the brand, has been especially challenging with increased competition. Courvoisier recorded 62 million euro sales in the first half and was included in our organic growth as of May. We've started to support the brand in key markets like the UK and the US with interim marketing campaigns, as I mentioned before. These are being done with a test and learn approach in a challenging category backdrop. On APAC, the brand strategy is still underway given the volatile external environment. And let me reiterate that this is important to consider this acquisition for the long term. as the category is still witnessing challenges, including the impact of significant pricing and promotional competition. For the rest, I won't comment too much, just to note that 21% of our overall portfolio is classified as local brands, given their geographic concentration. Sky remains an important part of our portfolio, and Q2 trends are encouraging, with ongoing growth in regions like the Americas and APAC. As always, I want to also share some of the highlights of our activations. And given the fact we're entering the peak season, the key focus for us has been in this period. So let's start with APROL. Some of you will have already seen this, I'm sure. But in mid-May, we launched a new APROL global campaign. And I wanted to show you the short video here. It was one of our biggest over the last few years with a launch across 30 countries. and a media budget of over 27 million euros, of which about 60% has been spent so far in the season. Despite the short time since its launch in key markets such as Italy and Germany, we see positive initial signals of consumer traction and impact on brand image. So we haven't tried this before. We're going to see if this works, so please bear with us, but let's see if we can run the app roll video.

Okay, hopefully that worked.

We didn't get to see it, so I'm really hoping it did. Great piece of campaign and it's been very well received. So on the next page, we wanted to share with you one of our more innovative activations. At the beginning of this month, we held an Aperol serves summer stunt in New York with a fleet of waiters carrying trays of Aperol spritz across Manhattan and Brooklyn to 40 bars with a high engagement rate. This was amplified online through an influencer partnership with Charlie XCX, and we didn't stop there. As always, liquid to lips activations are critical. You don't see it on this page, but we're activating 130 music festivals across EMEA, which is a 35% increase versus last year. In fact, five out of the top 10 festivals are new additions this year. In Italy alone, the increase is also significant. We will activate 31 music festivals this year compared to only six last year. In the US, we continued our partnership with Coachella for the third consecutive year, garnering 88 million social impressions. At some of these events, we're also testing some new serving solutions to better cater our customers' needs. For Campari instead, two main highlights of the quarter. First was our partnership with Cannes Film Festival for the fourth year in a row. At the Campari Lounge in the heart of the Palais de Festival, we welcomed over 70 top talents, and while on the beach, we hosted exclusive A-list after parties for the films premiering during the festival. The pinnacle of the event was the world premiere of Mads Negroni Mikkelsen's reinterpretation of the iconic Negroni, and you see him in the video on the screen. The event was amplified online across regions through PR, influences, and media activities. and the earned media was three times what was achieved last year. The second activation was the Bartender of the Year Awards in Milan. This event was held at the newly restored Torre Velasca, one of Milan's most iconic landmarks, as a tribute to the city's creative spirit. In the weeks leading up to the event, over 50 of Italy's best bars created exclusive cocktails and gave consumers a chance to join the celebration and win access to this unique experience. With a reach of more than 13 million and extensive media coverage with over 110 articles, this reconfirms how established leadership in the on-premise. Lastly, on Credino, our non-alcoholic spritz, we are ramping up the activations. And for the first time ever, Credino went on tour, bringing its iconic non-alcoholic spritz and Italian summer vibes to consumers in Switzerland, UK, Belgium, and Austria through its new kiosk format. Over 20,000 Credino non-alcohol spritz were served, and the events were further amplified by digital media, influencer campaigns, and on-premise activations. On top of this, we launched Credino for the first time in the U.S. during the quarter. We'll give you updates in the upcoming period also on this. It's still early days, but we're already seeing some positive tractions. So before handing over to Paolo for the P&L and balance sheet section, I'd like to give you an update on our key strategic priorities. We will hold a strategy session in person on the 6th and 7th of November in Milan, which I hope many of you will be able to attend. Given the market uncertainty, we've chosen these dates after the Q3 results, where we'll have higher visibility for the upcoming year. Moving to cost containment, you can see that in Q2, there is a visible slowdown in the pace of SG&A growth, and we expect the declining trend to start as of Q3. Therefore, we are on track to achieve our target of 50 bps benefit on sales in 2025 and 200 bps benefit in three years. On portfolio streamlining, we've achieved significant progress with the announced sale of the Cinzano, Vermouth, and Sparkling Wine business, which made up 2% of our sales and was margin dilutive. The sale for $100 million, and on top of this, we have transition, production, and distribution agreement following the close, which will contribute to our perimeter for a period of time. This sale, together with the previously announced disposal of the bottling plant in Australia and the streamlining of our agency brands, means that we have so far divested circa 3% of our sales, which are at lower profitability. As a result, the local brand portfolio share of the total group sales decreased from 25% to 22% on a pro forma basis. And any additional potential disposals will be based on optimizing the potential proceeds, and I can say that more conversations are ongoing. Okay, I'm going to hand it over to Paolo now.

Paolo. Many thanks, Simon, and hi to everyone. Let's start by looking at our EBIT margin dynamics. In the first half of this year, we recorded a resilient gross margin, while our disciplined approach to structural cost was broadly offset by brand building investments, as we had planned in Q2. In terms of gross margin, H1 was up 40 basis points, with an acceleration in the second quarter of a positive 70 basis points. This was mainly due to the phasing of input costs, and especially Agave. This prolonged gross margin, in fact, is now above 55%. Overall, we maintain our guidance for input cost benefit of 20 million euro for the year, but the benefits have faced faster into the second quarter of this year. Our figures are now incorporating the first impact of tariff starting from April of 2 million euros. We will discuss further the potential for real impact in the guidance section, but I can say that there is a wide range of potential impacts from a minimum of 4 million euros assuming EU tariffs are lifted and Canada and Mexico exemption is maintained to a maximum of 45 million in fiscal year 2025. On A&P, we had a step up ahead of the peak season and A&P to reach 18.8% in the second quarter. As Simon mentioned before, this was mainly focused on aperitifs with significant acceleration compared to past years, also benefiting from better weather conditions. The first half figure is 16.6%. As we continue to invest behind our brands, our full year guidance stays at 17 to 17.5%. As you all know, our cost containment efforts are continuing and becoming more and more visible. In the second quarter, we had less than 1% organic SG&A growth. In H2, we will start to see a declining trend in absolute terms, and we confirm our 50 basis point accretion guidance on a full year organic basis. As a reminder, the full plan foresees 200 basis point improvement over three years. Accordingly, EBIT adjusted was realized at €351.8 million in first half. Within this, there was a positive contribution from Perimeter of €1.8 million, driven by Tourvoisier until April, net of agency brands and FX impact of €10 million, which was mainly supported by the devaluation of the Mexican pesos. Given the current evolution of the currency, we foresee that the negative impact of weakening in the US dollar in H2 will be around 5 million euros at EBIT level. Let's move on to look at our overall P&L with a few comments. So far this year, operating adjustments are contained at 10.8 million euros, mainly driven by impact of the Australian derby plan disposal in the first quarter of this year, that we have already mentioned in the past. In Q2, the operating adjustments were only 3.8 million euros. On financial expenses, we recorded 50 million euros in the first half. This is on track with our expectation of 105 to 110 for the full year. The increase versus first half 2024 was driven by the higher average net debt of 2.4 billion versus 1.9 billion last year. For the average cost of net debt, which is at 4.3% versus 3.7% in first half last year, we need to remember that last year's figure was artificially low, given cash at hand ahead of the closing, cash coming from the rights issues. Adjusted first half 2024 would have been 4%, which indicates a relatively flat trend in financial expenses and coupon. Recurring tax rate is relatively stable at 29.2%, with a decline of 10 basis points versus first half 2024, whilst the recurring cash tax rate is at 26.9%. On cash flow, the positive trend remains in place, also positively impacted by a bid growth of 5% on a reported basis, 2% recurring. Recurring cash flows from operating activities before operating working capital organic change is stable at 397 million euros. This means that free cash flow conversion before operating working capital change is at 71%, so very high conversion rate. In the same period, recurring free cash flow is at $113 million, down only $18 million versus first half 2024. Recurring free cash flow conversion is at 27%. On the reported free cash flow, we are at $35 million positive versus a negative $60 million in first half last year. This figure includes extraordinary capital of $39 million, mainly related to the capacity expansion program and ESG initiatives. I will mention more on this on the next page. Therefore, you can see that we maintain our cash generative profile. As we guided in past calls, operating working capital trend has stabilized and will continue to be relatively stable. I will finish this page to summarize the evolution of our balance sheet key indicators. Solid operating working capital management is continuing with operating working capital as a percentage of net sales down from 59% in first half last year to 51% this year. Here, seasonal trends are important to remember given operating working capital buildup for peak season amounting to 187 million euros this year. Last year, there was also the impact of the safety stock buildup ahead of the opening of the Novi Ligure Aparixys plans expansion. Compared to the end of 2024, we see some increase, which is related to the buildup of finished goods safety stock in the U.S. ahead of tariffs. On CAPEX, maintenance CAPEX is at 3% of sales, relatively in line with the envisaged run rate of 4% for the full year. On extraordinary complex, our capacity expansion plan is continuing, but will end at the end of this year with a tale of 160 million euros in the second half of this year and reaching a total 200 million in the full year 2025. Last year base was higher mainly due to the one-off acquisition of the building. I mentioned already cash flow, so I will not go into details here instead. On leverage, we are at 3.2 times versus 3.5 times after the closing of the Courvoisier acquisition in May last year. As we progress, our target is to improve this ratio further. Net financial debt is at 2.4 billion, which is relatively stable versus December last year. And with that, I will hand back over to Simon for the guidance.

Great. Thanks very much, Paolo. I started this year by saying it was going to be a transition year. And this was based on our view that cyclical pressures would persist. In fact, our crystal ball seemed to be bang on. And the environment is one of the most complex any of us has gone through in certainly recent memory. And there is still very low visibility. It's early days, but we do see some encouraging signs with improvement in sellout in almost all of our key markets and our continuing outperformance versus the sector and our peers. For us, the Q3 peak season performance will be fundamental for clearer visibility for the full year. And we're putting all the necessary measures in place to make sure that we're well positioned. As a result, we continue to remain prudent with focus on what we can control. And as you've seen, we are delivering against what we told you we would. For the full year, our previously provided guidance remains the same. This means moderate organic top line growth and flattish EBIT adjusted margin before tariff impact. As a reminder, currently of the first half, we have flat top line and negative 130-bit EBIT adjusted margin. Recognizing the benefits we expect to flow through in the second half, we see no reason to change our guidance. The potential impacts from tariffs is not included in the guidance I just mentioned. In fact, on tariffs, there is still uncertainty, as there has been for the last four months. And the expected negative EBIT impact in the 2025 year ranges, as you heard, from circa 4 million up to, depending on the assumptions, 45 million. And that is if Europe is set at 15% and the exemption of Mexico is removed. So we recognize it is difficult to forecast this, but we respond as quickly as we get the information that you do. Regarding FX, the weakening of the US dollar may pose some potential additional negative impact for the second half of the year, while perimeter impact is expected to be negligible. Regarding the medium long-term outlook, we confirm our previous guidance. We are confident for the future. As I mentioned before, we will come back to the market with more details at the beginning of November in a dedicated session after we get through Q3. So to summarize the first half, we're maintaining our guidance for the year while we progress as planned in the key areas. We've got continued relative outperformance in sellout. We continue to manage the deleveraged trends. We continue the deceleration in SG&A growth, continued focus on commercial excellence and pricing discipline, and we continue to streamline the portfolio. So let's close there, and now we'll open the floor up to any questions. Thank you.

Thank you. This is the Chorus Call Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star N1 on their touch-tone telephone. To remove yourself from the question queue, please press star N2. Please pick up the receiver when asking questions. Anyone who has a question may press star N1 at this time. We will pause for a moment as participants are joining the queue. First question is from Sanjit Awela, UBS.

Hey, Simon, Paolo. A couple of questions from me, please. Firstly, on the US, can you just talk a little bit more where you are on inventory levels? I think you called out destocking on Grand Marnier. Are there any other brands in the portfolio where you feel your inventory levels are out of sync with the current rate of sellout? And just on that, would you expect sell-in and sell-out to be aligned in the US as we look into the second half of the year? My second question is on Italy. Can you just talk a little bit more what you've seen in the on-trade channels? Specifically, I think you highlighted very well the off-trade channel trends, but love to get your take on on-trade, what you've seen there in Q2 and at the start of Q3, please. And just maybe a broader comment on on-trade channel in the rest of Europe. Thank you.

Hi, Sandeep. Yeah, very happy to. Look, in terms of the DOIs in the U.S., our forecast on this is we're staying flat. We didn't increase any inventory. I know some of our peers did. In our first half, our numbers are broadly flat on where we finished out the year. I think on Grand Marnier, to be honest with you, we've got some challenging trends at the moment, so we're probably going to be a little heavier, but we're not building lots of inventory on that. Our focus is really just executing in the on-premise, really getting behind the Grand Margarita during this season and driving the hell out of it. More generally in terms of our forecast and the way we look at it is that ultimately ships and dips are aligned is the forecasting that we look at. So from that point of view, we don't want to be building wholesaler inventories. We want a consistent performance flowing through the whole value chain. I think in Italy on the on-trade, we are positively encouraged by what we're seeing in the on-trade. A couple of things, and this is maybe we're seeing it in Italy, but we're seeing it more generally across both the U.S. and across EMEA. As the teams are out in the entree, they're hearing that traffic numbers are actually quite positive. There's some research that's been done that says 21% of people are encouraged to go out more, whereas only 9% want to go out less. So there's a positive swing in that. But what we are finding is why people are going out and traffic numbers are up. that they are definitely affected by the economic situation in a number of these countries. If you take the savings rate across Europe, we're seeing less disposable income going into the on-trade as people moderate their spend in the cycle that we're in. And so as part of that, if you imagine if you go out and you have two drinks instead of three, That may not sound like very much, but when you roll that into a demand signal for a business like ours in Italy, it's a fairly big shift just simply based on someone saying, you know, I'm only going to spend money on two drinks instead of three. So I don't believe there's anything on the brand side or fundamental on it. This is purely around economics, and I think we'll come out the other side of it.

Very good. Thank you.

Next question is from Simon Hills, CT. Thank you.

Thank you. Good evening, Simon. Hi, Paolo. So just a couple from me, please. Simon, can I just sort of follow up on some of your comments generally about the accelerating trends I think we saw in many markets in Q2, particularly as you referenced in Q3? Italy and the US. Can you just provide a bit more colour perhaps for how the quarter developed itself? I don't know if you could talk to maybe some of the exit rates, what you saw in June when we were seeing some of that better weather finally sort of picking up in Europe and how has that translated in those sort of directly into the early July positive trading you sort of referenced? And then just secondly, just a quick one on the US logistics issue, which obviously hit Q1 and you got back most of it, I think you said in Q2. How much is left to sort of flow through in Q3, please?

Sure. Hi, Simon. I mean, I think in terms of the overall improvement in trends, I mean, the key thing for me is the outperformance. We all know it's a tricky market. We know consumers are being cautious on how they're spending. But if you look at our performance versus the sector, whether it be U.S. on-premise, we're up plus five, the sector's down two. You look at Aperol, we're plus 23, the sector's at plus two. On NABCA, we're at plus 10, sector's at plus two. In Italy, we're at plus three against the sector that's flat. We have multiple markets, and these are big, important markets for us that we continue to do very well in. I think for me it's about the relative outperformance that is one of the key messages that gives you a bit of confidence heading through Q2. In addition to that, as I said in the prepared remarks, we've got over 13 countries that are growing double digit. And to be honest, I don't see many of our competitors doing that at the moment. So it gives me a lot of confidence in terms of what we've got and how we're executing. I think in terms of the shape of the development through Q2, Clearly, June was a big peak. We saw the weather improve. We saw the launch of the new campaign. And a lot of our AMP that Paolo was talking about, that up-weighted AMP, really kicks in in June. So I think through June, and then I think that was the start of some positive trends. And we've seen those positive trends continuing in the beginning of Q3. What's the second one?

The logistics, I believe.

Yeah, on the logistics, yeah. I mean, in terms of there was some delay that we had, invariably I think we're now looking at how do we recover that in the second half. We think we've got about five or six of it back in the first half, and we need to recover the same again. In some cases, I think I mentioned we had some glass supply on American honey where we did actually hit out of stocks, so that's more difficult for us to recover. But on the other ones, I'm confident that we'll be covering that in the second half.

Got it. Thank you.

Next question is from Andrea Pistacchi, Bank of America.

Yes, hi Simon and Paolo. So, firstly, just a broad question on how you see sort of the next few months. I mean, Q2 was, I mean, very solid. Even when you exclude the technical effects, including visibility is still poor. You said you'll have better visibility at the end of Q3. But when you, yes, when you think geographically, what are you more or less confident on? I mean, in Italy, you've got an easy comp now in Q3, given also the destocking. And how are sort of wholesalers feeling in Italy after what happened last year when they were caught out? There was a lot of destocking in Q3 last year. So regionally, where is your level of confidence? And I just wanted to ask something, please, to Paolo about... about tariffs and potential mitigation. If we take probably the main tariffs, the US to Europe, assuming that 15%, I think you said 20 million impact it would be for this year, and then a 35 million annualized, that is before any mitigation. How much do you reckon you could potentially mitigate of this? And if I may squeeze in another quick one, please, it's on Sartre Rosa. which you're rolling out more. So how are you thinking about timing of going into new markets, pace of that, and how you're sort of positioning it? Is it more of a female skew? How is it different from the rest? Thank you.

Hi, Andrew. Sure. I mean, I think it's a difficult question to answer in terms of the confidence from a geographic point of view. As you've seen in this first half, we've seen some good growth across most of our major markets and our performance across most of our markets. Certainly, I think some of the things that we're looking at are more related to consumer behavior and that confidence. As I said, when we look at the consumer confidence, the savings rate, the disposable income in Europe, it's still a challenging environment. And at the moment, as I said, we're seeing probably Germany be the poster child for that consumer behavior. And so we've got to watch that pretty carefully. I think your question around wholesalers in Italy, I think they're positively responding to the increased activations that we're doing. We're upping the support for the brand. They're seeing that. They're seeing our new TV campaign. And I think they're encouraged by what they're seeing in terms of the execution and the on-premise. I think if we jump over to the other side of the Atlantic, look, it's still highly volatile. We all are trying to predict what's going to be next. And let's be honest, it's Pretty difficult to do that. So the impact that has on consumer behavior in that uncertain environment, again, as I said in the on-premise, is still, I think, people are going out, but they're maybe going out a little less as a result of the concern around employment, the impact of tariffs, inflation coming through, and just the geopolitical impact. So I wouldn't say there's a region I'm more confident or less confident on. What I'm looking at is really what the consumers are doing and making sure that we're executing brilliantly so when they are out, their first choice is one of our brands. So, Paolo, do you have the tariffs?

Yeah, with the tariffs, you know, the 15%, you know, the number is correct is, you know, it's confirmed, you know, because it seems that there are ongoing negotiations still for this year is 20 million and, you know, 35 million for next year. So, basically, the potential offsets might be just, you know, two of them. One is... you know, production delocalization in the US, but you know, in a, in a very, you know, volatile, uh, you know, environment where, when, uh, every other day there is a new news on, on tariffs, you were not planning, you know, any, any move in that respect, which would in any case take, you know, you know, time to be, to be implemented. Why say, you know, the second measure, you know, might be price increase, but given, you know, the current, uh, you know, uh, environment in the U.S. of, you know, relatively low consumer confidence and contained disposable income, we're not, you know, thinking at this stage to take, you know, a price in a meaningful manner in year 2025. Then 2026, we'll see. Okay.

Yeah, sorry. No, just to finish on that. So those numbers that you're giving in the short term, they are, I mean, the gross numbers, but that would probably be not far away from the impact you'd get in the short term if those tariffs are confirmed then.

Yeah, in the short term, the impact is as big as, you know, the amount of the tariffs that we have highlighted. Thanks.

Andrew, one of the areas on that, and I think this is quite important, is actually the tariffs is only one part of the story from a consumer point of view. The current devaluation of the dollar means that if you're running at 10 or 15 or 20 percent or whatever the tariff range is, you've then got a negative FX impact on it as well, which means that the ability to offset some of this is quite limited. But in answering your question on Sati, we're really encouraged by what we're seeing at the moment. It is at a premium price. It is a fantastic exotic liquid in terms of passion fruit and blood orange. And of course, it's bright pink. So it's not skewed towards females. It's skewed to people that enjoy the exotic taste of sati with a brand that increasingly we're building more and more relevance with. So we're in Italy, we're in Germany, we're in France, we're in the UK, and we're just getting going with it. But so far, it's pretty encouraging because it is absolutely incremental to what we're seeing within that Spritz segment.

Great. Thank you.

Next question is from Mitch Collett, Deutsche Bank.

Thanks. Hi, Simon. Hi, Paolo. At the four-year results way back at the start of the year, I think you had a line in your guidance about an improving trend in the second half of the year, and I don't think that's in today. So I just wondered, is that because the 1H was a bit better than you thought, or was Or perhaps is there, you know, because of limited visibility, tough market conditions, are there reasons why maybe you're a bit more cautious now than you were then? And then I guess I hear a bit in the industry press about the spaghetti. And I wondered what your thoughts were on that. It's not a new cocktail, but is that a good way for people to consume Aperol? Is that something you're optimistic about going forward or is it broadly irrelevant? Thank you.

Sure. I mean, I think in terms of the improvement in the second half, I think generally, I think the entire industry is hopeful for that, given the fact it's been a pretty bumpy 12 months for the whole industry. I think in terms of our guidance, I think it's in there. We still believe that we'll see an improvement in the second half driven by some of the margin accretion that will come through the SG&A savings we've already indicated. So I wouldn't see any change in terms of that. I think on the second one, the best thing about AppRoll is the fact that they love experimenting it as well. We have our core range that works really, really well. One of the things on this is that the bartenders get behind it. They support it because they see what we do and then continue to experiment. So that's one of several different versions that we've seen. And we'll see how it develops.

Great. Thank you very much.

Next question is from Edward Mundy Jeffries.

Evening, Simon Parlow. I've got three brand questions, if that's okay. The first is on Aperol with your new campaign. I was hoping to sort of get a bit more context in sort of what you're hoping to achieve through it, what type of sort of fresh thinking are you hoping to bring to the brand? You know, clearly, Apple's got very strong brand equity. What is it that you're sort of hoping to achieve, you know, through that campaign? The second is on Courvoisier, where you saw some growth within the UK with the new marketing campaign. you know, again, what's behind that? Is it a brand refresh? Is it packaging? What are the sort of attributes you're trying to get behind that, Simon? And then the third one is on Credino and this other aperitif category that's seeing very strong growth. Could you perhaps unpick sort of which, you know, what's the growth rates within that? Is it all Credino? Is it Sartorosa? Is it the RTD April Spritz? What is it that's really driving that growth?

Sure. I mean, starting off with a new campaign, this is the first time that I think we've gone out and really used the campaign to show the occasion. So this is about driving relevance, frequency, and really championing the occasion that is uniquely Italian, but aspirational, even if you're not Italian. And I think that was the key message we were trying to get through. We put in some new rigorous testing now on all of our advertising, and this ad tested extremely well in terms of relevance. and in terms of brand fit. So from that point of view, we're very confident, which is why we doubled down on 27 million spend behind it, which, let's be honest, is not an insignificant amount of money. So I think from that point of view, very keen on it. The key thing on this is we'll then see what we learn from it as we finish the campaign through the peak season. But as I said in my comments, I think the response to it has been very positive. And certainly on some of the social media tracking, we've seen some good support for it coming through on that side. Um, secondly, on was in the UK, as we said that when we acquired the brand and my comments back at the beginning of the year, yeah, this is something that's going to take some time. We are operating in a category that has seen its two biggest markets, us and, uh, and China, uh, have an extremely tough time. And so we are testing some different interim marketing campaigns. So we have one in the U S that is slightly different than we were testing in the UK. Um, but what it is giving us is it's giving us some, some noise and support for the brand. that the brand really hasn't had very much. And as a result, I think we're seeing some positive response and just enthusiasm for what is a much loved brand in the UK getting some attention again. So I think that is what is really helping there. And we'll take the learnings from those two campaigns as we shape the broader reset that we're still working on, given how dynamic the category is, and also making sure what we come up with is truly ownable by the brand and different from the category. I think the final one is in terms of the growth from the other properties. There are three brands that are really driving it now. Number one is driving it is Sati. It's now 9% of our sales in Germany and continues and double and triple digit growth in many of the markets it's in. We've seen positive response behind Aperol Spritz, where we've seen a shift towards that convenient format, opening up new occasions. The latest numbers off the top of my head are running at plus 18%. to give you an idea. So you're seeing a bit of a switch, but another angle to the Aperol brand playing in occasions we haven't been able to play in in that convenient space. And then the third one has been Credino, where we've seen positive response in Italy to some of the TV campaign we've been running there, but also positive response to the launch into new markets where the non-alcoholic spritz and the unique liquid that we have with Credino is starting to build traction.

Thank you.

Next question is from Trevor Sterling Bernstein.

Hi, Simon and Paolo. My detailed questions have been answered, but then one overall question, Simon. Compared to three months ago when you last talked to us, what has gone better than you expected over the last three months and what's gone worse, what's disappointed you?

Good question, Trevor. What's excited me is when I wake up and see the sun on a Friday. That really makes me very happy. That's one thing. Joking aside, the weather has helped, but actually what I'm probably more positive on is the focus of the team behind the execution during this peak season. We are better organized, better targeted, and executing better than, as I understand it, we've ever done before. And I think that's what really gives me some enthusiasm behind it. It's also, I think, realizing the potential that we have with this portfolio and actually seeing how when we start getting other consumers introduced to it, whether that's in Australia with a plus 24% growth or in Thailand or in South Africa or in Argentina, you're seeing a universal appeal for what it is we do. And that for me is really pretty exciting.

That's particularly on Aperol when you refer to that.

Yes, it would be. But also, as I said, the growth that we've seen on Sati, on Codino, on the Aperol Spritz as well, and also on Campari. I mean, I think so from that side, I think it's been very positive. I think the fact that we're holding pricing discipline on Esplanade, on Repo is important. It would be very easy to follow some other people down on that. We don't think that's the right way to go. We are The company wants to take a long-term view, and really it takes a long time to get those prices up. And so we want to hold that pricing as long as we can in a very competitive environment. I think the worst thing at the moment would probably be the volatility that we're still seeing because of the results of geopolitical events and also that the impact that has on consumer confidence and people getting out. I think we are seeing people going out, but as I said earlier, it's just seeing a more discretionary spend when they are out. We're hearing this from the entree. We're hearing this from restaurants. And as a result, it's just a bit different.

Super.

Thank you very much, Simon. Sorry. It's also the uncertainty of tariffs, Trevor, which, again, keep going up and down. I know all of you will be modeling this. Every week something changes. So I think hopefully we're starting to get to something that eventually we all know what it is and we can then plan around. But it is quite disruptive.

Super. Thanks very much, Simon. Thanks.

Next question is from Javier Gonzalez, Lastra, Bernberg.

Yeah, good evening. I had one question on agave. I was hoping you could help us understand better how much of the benefits from lower agave prices are already in the base and how much is still to come as supply contracts continue to roll over.

and linked to that um are you are you reassessing your self-sufficiency ratios now that agave prices have come down and i guess the value of land is probably reflecting that thank you yeah on the yeah on the agave price we've uh you know originally gathered the market towards uh you know potential uh you know tail end effect of uh you know 20 million euros for year 2025 you know due to The agave spot price coming down well below the 10 pesos per kilo. The point I made is the facing of that benefit that is more front-loaded than we thought, and we've seen that in the gross margin expansion of the second quarter of this year. But, you know, that said, you know, we confirm, you know, the original guidance of those, you know, 20 million euros with, you know, clearly, you know, on the other end, you know, a risk that is more than a risk due to, you know, the tariffs, which now it seems being, you know, defined at 15% on EU imports and Mexican Canada to be understood. And the other thing is that, you know, clearly, you know, the third quarter of the year is still a quarter that is extremely important for the aperitifs, which, you know, has, you know, opportunities and risks sitting in that vis-a-vis the seismic. So, you know, so basically the point is that there's no change in guidance vis-a-vis what we've announced three months ago. You know, the agave price, you know, stays, you know, very, very low. For coming year, there might be, you know, a minor, you know, tail end effect of that. But we need to understand how, you know, the current negotiations with local suppliers, you know, would end up. By year end, it will be, you know, more precise vis-a-vis 2026.

And the second part of the question, on the self-sufficiency ratio?

On the land, we're in a good spot.

I mean, I think it's a buyer's market, so it's a market where we have access to what we need.

Thank you.

Next question is from Lawrence Wyatt Barclays.

Good evening, Simon and Paolo. Thanks very much for the question. A couple from me, if that's okay. I remember historically in Italy, whenever there was a sort of economic weakness and consumers felt somewhat weak, it was often said that Aperol would benefit because people would use the sort of aperitif moment to have tapas, and that was almost an affordable way to getting some food without having to go to a restaurant. I suppose at the moment we don't seem to be seeing that effect with sales in Italy still relatively weak, despite that economic circumstances. I'm just wondering if you think that story still holds. Do you think Aperol in Italy is a beneficiary in economic times for that reason, or do you think that's probably perhaps a little bit old now? And then secondly, just on Cinzano, just wondering your rationale of selling that brand. Of course, it can be used as a key ingredient in one of your core cocktails. and just thinking about if there are any other brands or how you're thinking about disposals going forward. What would the criteria be for any future disposals? Thank you.

Sure, Lawrence. I mean, I think, look, in terms of Italy, I'm not sure I quite see a driving trend in terms of tougher economic environments in Afrol and Tapas. I think some people would do that, without a doubt. There'll be some people that would do it, but I don't think that's going to be one of the driving trends of the performance of seeing an Afrol, but I'm sure there is some of that behavior going on. In terms of your question around Cinzano, as I said up front, the priority on this is that we want to de-lever and we want to streamline the portfolio. So by going down this disposal route, it allows us to do both things. And not only is it in terms of the cash contribution that by streamlining we can get our leverage down, it's also the sheer complexity that we have with a portfolio that most of the brands that we're looking at are significantly margin dilutive. In terms of having a brand that is one of the key ingredients in a spritz, yep. But there are also a lot of other brands as well that we work with in different markets around the world. So we didn't see that as a key reason to keep the brand. From a geographic expansion point of view, you know, some core markets on it that didn't really help us with some of our other ambitions. And we found a great home for the brand with someone who will passionately build it. and take it forward. So we think it's actually a really good fit. And ultimately on this, while it's got an impact on the top line, it was significantly margin diluted as well. So in terms of looking at the other brands, there are brands in our portfolio that would have similar roles. And unless we can see real global potential, margin accretion or development of margin accretion or a strategic role for the brand, then we're looking at it saying, okay, some of the brands that we've acquired in the past were bought for a particular reason to give us strength in route to market or something like that. And as the group has grown, it's just those that become less important in terms of the role that they play. And so that's really what we're looking at. Chinzano was absolutely an example of that where it was bought as a route to market enabler for the rest of the portfolio way back. And so really it's looking at brands like that and saying which ones potentially do better in someone else's portfolio.

That's really clear, Simon. Thank you very much.

Next question is from Chris Petcher, Redburn.

Yeah, thank you, Simon and Paolo. I have questions on Courvoisier and how that's playing out through the business. If I look at the disclosure on the House of Cognac and Champagne, Courvoisier, in the couple of months that you consolidated organically, must have contributed 14, 15 million of organic sales growth as you're cycling what was a very disruptive period and a huge amount of destocking. I imagine you've probably got that in the second half to benefit you as well. In terms of the underlying, you touched on it, but in terms of the underlying health of the brand, it's probably too early to say, but can I just confirm I've got those maths right? And then secondly, Simon, in terms of following on really from Trevor's question, I mean, in terms of what's taking up most of your time, that house, the House of Connick and Champagne has probably got the most capital tied up in it of the business. And based on the numbers today, it's the one that's probably performing some of the weakest. Is that taking up more of your time? I appreciate you've got a very well-equipped board to help around that as well. But can you just give us a bit of sense how you're addressing that house? Thank you.

Yeah, I think I'll hand over to Paolo in a second in terms of a specific question. But I think, look, ultimately, Uncle Wozniak, We've got to recognize this is a brand that has not had a whole lot of attention in nearly 20 years. And so where we are starting to do stuff, we see a positive reaction to it. It's a brand that has got fantastic liquid. It's got a great provenance. But a lot of the consumers don't know that much about it. And so we've got work to do on it. So, Pala, do you want to take the question around how much was in the first half and second half?

How good was it? Yes. Yes. Yeah, I mean, the organic growth due to Gruvazie is, yeah, 14, 15 million euros. You know, clearly, you know, built on a very low base. As you know, last year, you know, the first-time consolidation of Gruvazie, you know, led to a very soft start to the year. In H2, you know, I think... I mean, we're not planning, you know, passive, you know, organic growth on Courvoisier. And then there is, I think, a question vis-à-vis, you know, the business model of houses of Cognac, which is, you know, quite intensive in terms of capital needs. I mean, this is, you know, structural to the house. You know, clearly, as we... You know we we we can finalize the strategy on on who was here and we will better define with the you know long term forecasting the the needs for the brand that we will. We took an adjust the you know the aging liquid profile. You know that side we do not envisage at this stage. You know significant changes vis-a-vis you know aging liquid inventory on on purpose the bread.

As we said, Chris, I mean, ultimately on this, this is a long-term play. You know, this is going to take time. It has not had a whole lot of attention. And so on one side, you can see it getting a lift pretty quickly, but this is a category that is also pretty tricky at the moment, particularly given what's going on with some of the pricing and some of the key markets. So I think in answering your question, what am I working on? Yes, that's part of it. A big area of focus the last three months has been looking at the portfolio, understanding the interrelationship between the brands, working with the team to develop a new strategy, which we're keen to take you through more in November, looking at the geographic expansion opportunities, the penetration opportunities in major markets, looking at the team, and then also looking at the culture, which is, for me, one of the big things that really does make Campari unique. We have an amazing team of Camparistas who are passionate in a way I haven't seen in the four other companies I've worked at in this industry. So what's taking my time at the moment is putting all that together to say, right, how are we going to win? What does it look like? And where are we going?

Thank you.

Next question is from Jen Cross, BNP Paribas XM.

Hi, good evening, Simon. Just one question from me. You just talked about your strong competitive performance in the US, but obviously the industry is still quite challenging. So I just wonder if you could talk us through what you're seeing from competitive and promotional dynamic in the market. Have you seen any significant change sequentially versus Q1? Thank you.

Hi, John. I think, look, ultimately on this, It is a very competitive environment at the moment. As you know, as you will have heard from our competitors, where the market is not growing and it's flat or slightly declining, then everyone's having to, it's a market share fight. And as a result, you're going to see people that are taking very short-term decisions around aggressively going after volume and people like us that are going to be more balanced in terms of saying we will promote when we need to promote for our consumers. But ultimately on this, we don't want to simply try and hit the volume target. We want to keep the value in the brands that the team has successfully built up over many years. So I think, look, if I take an example, let's take tequila in the US. At the moment, we're seeing a pretty aggressive pricing going on in Blanco. And you're seeing a number of people get very aggressive. We are not. We're dipping in where we need to in certain states and certain channels. But we're also holding pricing discipline in repo. And we're still holding, and we're still getting the volume growth. So with all these things, I think there's always a bit of a balance. But I think the thing that probably separates what we're doing is I think the benefit of our shareholder structure is we take a long-term view. It's taken a long time for us to get to some of these price points, and we're not going to give it up just because there's a cyclical impact that's economically driven in the U.S.

Thank you.

Next question is from Paola Carboni, Equita Sim.

Yes, hello. Good afternoon, everybody. I have a couple of questions. The first one is about Crodino. If you can elaborate a little bit more on your expansion strategy, in particular the format you are proposing with the different markets. I mean, from an Italian base, let's say, I keep seeing the small format, but I was wondering what is in place in the other markets and if anything is going to change in Italy as well, and also what's your strategy for the U.S. market how have you positioned the brand and whether you are going to follow something similar to the three stages penetration of Aperol, for example, or focusing just on specific cities and so on. And the second question is instead on your encouraging messages about the start of the peak season with aperitif, especially in EMEA and in Italy. Just, I mean, to have a bit more color of what you are seeing in terms of sell-in but also sell-out and whether you feel trade is building up inventory because of good weather, because of, I mean, hopefully a better season than the last couple of years or is also, let's say, a good start of the season in terms of sell-out. Thank you very much.

Yeah, I mean, I think, look, with Codino, what we're doing at this stage is we're learning. What we've seen is the fact that the brand has this amazing heritage, you know, longer than pretty much any other non-alcoholic product by a long way with 1965 and this amazing Italian heritage that we know is aspirational. And so we've been building on that and learning what is the right way for us to take this out of its home market space. and really start expanding it. So we've seen some positive trends in the UK. We've also, as we've recently launched, as I said, this quarter into the US. It's a 17.5 size is what we've run with. And really we're testing in small stages and we're learning. So we don't have a full growth model like we do on AppRoll yet, but that's something we're going to continue to learn from as we roll the brand out. The non-Alkspace generally is a learning curve for everyone. And as a result, We're seeing how this fits in, what are the occasions, which consumers, and what we need to do to really leverage what is a truly unique equity within the non-ALC space. No one has anything like this. And so we think it's got legs for the long term. I think the second question around peak season, sell-in versus sell-out. I mean, as I said earlier, the performance in Italy for Campari Group generally was plus 3% in a sector that was flat to declining. So we continue to outperform, and we're seeing that really pull through into the important on-premise. So I think for a sell-in, sell-out, we're seeing matching. I'm not going to comment on July, but certainly through June, they were the trends that we saw.

Thank you very much.

For any further questions, please press star N1 on your telephone. Mr. Hunt, Mr. Maccasini, there are no more questions registered at this time.

Okay, fantastic. Well, thank you very much for your time. We hope that we'll be able to see many of you in November. But in the meantime, if there are any other follow-up questions, please get in touch with our team directly. But thank you for your time.

Ladies and gentlemen, thank you for joining the conference. It's now over. You may disconnect your telephones.