Remy Cointreau Sa Ord

Hello and welcome to the Remy Cointreau Q4 sales publication call. My name is Laura and I will be a coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be unlisteningly. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Luca Malotta, the CFO, to begin today's conference. Thank you.

Hello, everyone. As you've seen on the press release, full year sales were down 19.2% in organic terms, including a roughly flat performance of minus 0.7% in Q4. This performance reflects some positive phasing effect in China, as well as a stabilization in India following some destocking in this region in Q3. In addition, we benefited from a positive calendar effect linked to the Chinese New Year. We estimate that at around 4 points, i.e. around 10 million euros. In parallel, the U.S. showed a sequential deterioration versus Q3, which was driven by some shipment phasing. As mentioned in January, we anticipated some shipment from Q4 to Q3 to optimize as much as we can our level of intermediary inventories at the end of our fiscal year. Overall, the 12-month sales decline is split between a volume decrease of minus 14.6% and minus 4.6% of price-mix effect, impacted clearly by the American region as a result of the sharp Cognac's underperformance compared to Lyfos and Spirits. Finally, the cost-cutting climb is right on track, and we confirm the $100 million cost saving for the year. Looking at the overall sales performance by region, Americas was down 39.6% in 12 months, including a sequential deterioration in the last quarter, Q4, due to negative phasing effects both in cognac and lychosin spirits. APAC was up plus 2% in the 12 months, including a significant growth in the last quarter, driven by cognac in China. Positive phasing and, as well, some calendar effect. EMEA, last button of the list, was up plus 0.7% in the 12 months. The last quarter, sales were up strong double digits despite contrasted trends among sub-regions and continuous soft consumer trends. This was safe, selling. Now, let's talk of the best approach to final sell-out, value depletions at group level over the past 12 months. In the U.S., value depletions were down mid-teens and now high single-digit, excluding the SOP. As compared to pre-COVID-11, value depletions were up plus 10% and increased by 45% for five, excluding the SOP. In China, despite high comps and a complex environment, value depletions were up no single digit in the 12 months, of which plus high single digit in the last quarter. On a four-year basis, China value depletions were up plus 75% versus previous pandemic and were multiplied by three versus Q4 1920, which is huge in terms of exit rate. Finally, in EMEA, value depletions were down low single digits this year. This represents an increase of more than plus 20% if you compare to 12 months in 1920. Overall, a group level is a general equation. This means that 12-month value depletion grew at approximately plus 40%, 4-0, on a four-year basis, so clearly faster than CELINE, which was up plus 16 on the same period. Last words in terms of organic guidance. Organic guidance, I repeat, is confirmed. Now, on pages three to seven, we pick up some initiative that's been undertaken over the quarter. Let's start with page number three, with Louis XIII and the opening of two boutiques in a three-standing store in China, bringing the total to 10 boutiques, or three-standing store, if you want, for the brands. First one in Haifei, five million people, seen as the future Chinese Silicon Valley. The boutique is located in the Heifei Jin Tai Mall, the first and only high-end luxury mall in the town. Our 68-square-meter boutique is located on the ground floor among luxury brands to leverage high premium traffic. The second one, second boutique, in Suzhou City, 8 million people. one of the fastest-growing cities in terms of GDP per capita. The mall has opened in 2023, last year, and the boutique is also located among key luxury brands. With these new boutiques, as Eric Vallard pointed out and said during the H1 result, the objective is to test the franchise model with the key strategy partners, G&G, having a strong expertise in the luxury art goods sector. Through this model, the ambition is to address Tier 1 and Tier 2 cities in a quicker way without any difference for the final offer for the clientele in terms of look and feel, pricing, or selling ceremony. Page 4, quick word on Brucoladi, which recently reveals a new luxury redefined range. featuring first permanent high-age statement whiskey range, the 18- and the 30-year-old single malt Scotch whiskeys. So far, these new ranges have been rolled out in India and the U.S. and are about to be launched in China. The new luxury refined range is conceived, distilled, measured, and bottled only on island. The bottlings feature an industry-first bespoke sustainable outer wrap. The first permanent 18-year-old single malt in Bruccaldi portfolio is an ultra-high provenance single malt whisky. Every single element is fully traceable from farm to glass, which, for a whisky of that age, is quite unique and incredible. The Bruccaldi 30-year-old is the story of the distillery resurrection. Embody that. The Broccolati story almost ended in the late 20th century when the doors of the distillery were forced to close in 1994. Over the next seven years, the two remaining members of staff safeguarded the cask which continued to mature in the depths of the warehouse before the distillery was restored in 2001. Broccolati 30 has been distilled using this high legacy cask. Rugladi 18 is priced at £150 and Rugladi 30 at £1,500. At the same time, Portia Lot unveils its first 18-year-old single-matte Scotch whisky. This release, priced at £175, is the oldest expression of the heavily-pitted single-matte Scotch whisky to be released to date. So far, the results... are very encouraging as the new ranges have been well received by the trade and selling has been 60 60 above targets page number five one word on the release of our latest innovation for the gene our gene the botanist Following the release of a tribal retail exclusive, the Botanist Ebridian Strength, the Botanist has unveiled two new additions, the Botanist Cask Rested and Cask Aged Genes, inspired by Reposado and Hiroki Tequila. The Botanist Cask Rested Gene is a cuvée of around 16 different cask types from a variety of regions and has been aged in Brocolabi warehouse, Oneida, for a minimum of six months. The Botanist Cask Aged Gin is a cuvee of around six different cask types from the right regions and has been aged in Broccolati warehouse for a minimum of three years. Botanist Aged Cask Aged Gin will allow us to compete in the premium spirits category with these products, recruit new drinkers from other super premium spirit categories, catapult the botanist into new occasion, a new type of consumer, Reinforce our distilling expertise, aging credential, and provenance. Botanist cask rest is priced at £50, and botanist cask age is priced at £70. So far, and of result, these two launches are promising, with selling being almost three times bigger than our internal target. Page six, a few illustrations of the activation made in China for this Chinese year. Our teams have done an amazing job to support growth in a very complex market affected by a persistent low confidence since the reopening of post-COVID. As you know, Chinese New Year 2024 was not a great vintage and showed soft trends. However, our value depletion has proven to be resilient and we continue to gain market share led clearly by Club and XO. By channel, e-commerce has been a very efficient weapon, once again, for us to place these at wins. Boosted by our Superbrand Day on January 12, which recorded 10% of sales growth, our e-commerce channel grew by almost 30%, 3-0, over the last quarter compared to last year. Page seven, last but absolutely not least, travel retail, as expected, as guided, as announced, travel retail sales are now back to pre-COVID level and even above that time with sales up high single digit versus full year fiscal year 1920. And this despite the only partial recovery of the Chinese tourism industry. Many activations on Chinese New Year and the 300-year celebration of remarketing have been done to support this strong sales acceleration in Q4. So now let's talk about marketing initiative. Let's talk about figure again. Slide number eight, and moving to the 12-month sales analysis. sales amounted to one billion, 194.1 million, down by 354.3 million year-on-year, or if you want, minus 22.9 on a reported basis. This reflects, first, a very strong organic decline of around 300 million to 97.2, i.e., as said, minus 19.2% of organic sales decrease. This performance is split between minus 14.6% of negative volumes and, as said, 4.6% of price mix, negative one, linked to the Americas underperformance. Regarding the latter one, this is a combination of the positive price effect, low to mid single digit positive, and negative mix effect around high single digit. So pricing without mix was still positive. Second, a negative currency translation impact of 57.2 million euro or a 3.7% loss in the top line in terms of conversion for the full year 2022-2024. This loss was largely driven by the deterioration of the Chinese yuan for 30.3 million euro and the US dollar for 19.7%. In addition, Canadian dollar, Japanese yen, and Hong Kong dollar posted a slight loss of respectively 1.8, 1.7, and 1.1 million. On the small positive side, we have to highlight Polish zloty, British pound, and Swiss franc for less conversion gain. On page number nine, or slide number nine, the user performance by division to be compared to the 12 months, 19-20. I will not detail the figures. They are all on the slide. In a nutshell, volume performance is strongly down in cognac amidst the current US contest, while price mix continues to be very strong. Overall, total cognac sales are still up plus 5.8% compared to pre-COVID, including important stocking in the U.S. In parallel, at the same time, lacrosse and spirits continue to generate a significant increase in performance as of pre-COVID, driven both by volume and price mix, and all three regions are clearly in very positive lands. Now, we begin a bit more Slide number 10 into organic trends by region. Let's start with APAC whose full year organic sales were up plus 2%, i.e. plus 51.4 compared to four years ago. Looking at the volume value equation, the performance year-on-year was mainly driven by a positive price mix. Specifically on China, China's sales recorded significant growth in the last quarter, boosted by some effects. First, positive shift in phasing linked to orders initially planned for December and finally booked in January. A positive calendar effect, i.e., the 10 million euro, which is four points at group level, but 13 points specifically at APAC level. And overall, in terms of Chinese New Year, we can say that it was really soft, that above, better than our internal expectation. And indirect channels outperformed direct channels, following meaningful stocking in Q3, as you remember, while e-commerce was once again up plus 30% to reach almost 25% of sales on the Q4. Despite this context, 12-month value depletion, a group level, were up low single-digit versus last year, of which high single-digit in Q4, i.e. up plus 75% on the 12-month versus 19-20, and if you focus only on the Q4, more than three times bigger than the pre-pandemic level in Q4 at that time. Consequently, at the end of Q4, inventories in China are back to a clearly healthy level. West of Asia reported very strong double-digit growth in Q4, led by Cognac and driven by Malaysia, Singapore, and New Zealand. End of March 2024, APAC as a global region accounted for 40% 4-0 of our group sales, up 7 points compared to last year. Second region, Americas. Americas for the organic states were down 39.6%, i.e. minus 4.1 versus four years ago. Mostly impacted by volume differences, while price mix was also negative due to the strong underperformance, so more mix than price, of cognac compared to Lycos spirits. Let's talk more specific of the U.S., Sales recorded a significant, important decline in the last quarter, showing a sharp sequential deterioration from Q3 impacted by, first of all, negative phasing effect both in cognac and lycosine spirit, saline, as we have decided to shift most in Q3 to give more time to the whole sale to deplete or optimize as much as we can our intermediate inventories at the end of our fiscal year. Second point, a sequential visible deterioration in depletions against high comps in a market still very, very promotional. Despite the continued stock in absolute value in Q4, in terms of volumes and value even more, which bring down to the level of inventories to the level of pre-COVID, even less for some brands or for some states, in terms of money, in terms of value, working capital immobilized by the wholesalers, by the retailers, this is not yet visible in terms of days of stock average due to the sequential deterioration of the depression of the quarter. I'm sure some questions will be on that. And as a consequence, the level of inventory is, in terms of day log coverage, if you want to do some maths, is still around five months overall at the end of the Q4. On a 12-month basis, value depletion are down mid-teens year-on-year, down high single digits, including the DSOP, and approximately plus 10% compared to four years ago, only 12 months, plus 45% compared, if we compare without the SOP. In terms of Canada performance, states were up a very strong double digit in Q4, led by Lagos and Spirits and Cognac, and in parallel, Latin America was also up a strong double digit in Q4, led essentially by Lagos and Spirits division. End of March, Americas accounted for 38% of our group sales, down a massive 12 points compared to last year. Finally, EMEA full-year organic sales were up plus 0.7, so slightly positive, and grew by 7.6% if you compare to four years ago. This year-on-year performance includes a strong price-mix effect, very strong, while volumes were strongly negative. Digging in by sub-region, Western Europe was up a strong double-digit in Q4, driven by some countries like Greece, Spain, Austria, even on small basis in Switzerland. Markets remain soft overall, but demonstrate a continued resilience of the on-trade channel, mainly in Southern Europe. UK was up mid-single-digit in Q4, led by common division in a tough market still dominated, clearly dominated by promotion and down-trading. The rest of EMEA region, sales were up a double digit, led by Africa, Middle East and Eastern Europe. The latter benefited from a positive phasing effect. Meanwhile, Benelux showed at the same time a good momentum, essentially in Lycos and Spirits and essentially in Cointreau, but the Cognac division was affected by Piers' huge drastic promotion. Over the last 12 months, value depletion for the region were down low single digit representing more than 20% of the debt depletion growth versus four years ago. But as a consequence, the fork between sell-in and depletion, inventories in the region were slightly up versus the end of December. End of March 2024, Indian region accounted for 22% of group sales, up five points compared to the previous year. Now, let's turn to line 11 and the analysis by division, starting with Cognac. Cognac posted a full year organic decline of 25.1%. reflecting a significant decline of 29.7% in volume and a strong price mix gain of 4.6% at the end of March 2024. At the same date, end of March 2024, coin division accounted for 65% of our sales, more or less two-thirds, down six points year-on-year. Let's start to begin by the region, starting with APAC for Cognac. And clearly, we start with China. In China, sales recorded a significant growth in the Q4, boosted by favorable phasing of shipment and positive calendar effect. Over the same 10 million, which is for the Cognac division overall, is waiting for selling point. Overall, the underlying trends remain a bit soft due to a low consumer confidence and persistent cash pressure in the trade. Despite this context, value depletions, the best approach to the final consumption, have been quite resilient, up double digits in Q4 year-on-year, and I repeat, because it's massive in terms of change of gears, three times more than four years ago. driven by Club, a demo product, and to a lesser extent, Renixo, which gained market share this year. On a 12-month basis, value depletion were up no single digit, i.e. around plus 75 versus full year 1920. As a result, end of March, our level inventory is back to empty level. Zooming by channel, on trade, for us, continue to underperform. It is a weakness on time, sometimes a strength as well, impacted by some down trading and a lower spend per capita. Within the off-trade, banquets and key account customers have been more resilient, while e-commerce has said, and I repeat it, still very dynamic, boosted by Superbrand Day in January. In parallel, we recorded a strong quarter for Hong Kong and Macau, while Taiwan was weak, impacted by some unfavorable phasing effect. Remaining part of Asia, phase grew a very strong double digit in Q4, led by Southeast Asia, particularly Malaysia, Singapore, and Vietnam. Japan recorded a weak performance, reflecting a soft change here. In Americas, In North America, cognac sales recorded a significant decline in Q4, impacted by the U.S. market, while Canada was up strongly double-digit in Q4. U.S. decline reflects the continued stocking, our firm position on pricing in a persistent promotional market and a soft underlying demand. At the same time, Q4, U.S. value depletion, so not saline, but value depletion, were down very strong WGT year-on-year with a strong underperformance of the S&P. Strangely, the two extremes of the portfolio outperformed. On one side, we're 13 back to very strong WGT growth, and the other side, Renewing, representing our first empty price, even on a marginal quantity, is showing good momentum. even if I repeat, on a very marginal basis. Considering the deterioration of the depletion, the level of inventories on cognac is, as said, still around five months in terms of days of coverage. It's not absolutely the same picture considering volume and value, in absolute value, compared to four years ago. This includes a flat price-mix effect year-on-year in the last 12 months, period, end of March 2024, but on a four-year basis, price-mix or value-depletion is clearly up 20%. That's the reason why sometimes in your calculation, you are maybe too focused on a year-to-go and a year-to-date on volumes, and you forgot for us, compared to our peers, that you have a positive, accretive value on value-depletion much better than our peers this is also the reflect of the clear of the strategy is sticking to that so you have paid some prices and volume you have some benefit and benefit it's visible not only selling even more on sellout Latin America states were down a very strong WGTQ4 still impacted by fierce promotional competition In EMEA, cognac sales were up a very strong WDQ4, led by Africa, Middle East, Western Europe, and Eastern Europe. UK showed a good resilience in a very tough market, while, as said, Benelux recorded a strong decline in sales, impacted by very strong promotional competition. Overall, underlying demand in EMEA for cognac remains a bit soft, as inflation is waiting on a purchasing power. Let's now turn to slide number 12, so the performance of Lacoste and Spirits division. This division was down minus 4.6% on organic basis in the full year, including a decline of 6.4% in volume, a positive price mix of 1.8%. At the end of March and then of weight, Lacoste and Spirits accounted for 33% of sales, up 6 points versus last year. Now let's review the performance by region. Let's start with North America. In North America, where sales were down a very strong double digit in Q4, impacted by the U.S. market, while Canada was up a very strong double digit. U.S. trends reflect the important restocking made in Q3 to optimize our inventories at the end of March, as well as the very high comps. More specifically, on Cointreau, as you can see, U.S. value depletion were down mid-to-high single-digit year-on-year this quarter, but still almost plus 65% compared to four years ago, affected by tougher comps in Q4 as we were cycling adverse phasing from prior year. In addition, the current contest is driven by more global general caution from retailers. Besides that, Price mix value position was here down four points versus last year in the last 12 months, ending March 2024, and up 10 points on a four-year basis comparing to pre-COVID. In parallel, Latin America says we are up at a very strong WGTQ4, like Brazil, Puerto Rico, Barbados, and the close business. Second region in terms of weight for Latin spirits is INEA. Sales were up mid-teens in the last quarter, supported by all sub-regions, particularly Benelux and Western Europe. Saremi for the U.K., Groveradi for the U.K., Metaxa Greece, and the bottom in Germany are some examples of brands and countries clearly outperforming, performing better than a factor and better than last year. However, markets remain soft generally overall and highly, very highly competitive on the back of the persistent inflation. Solid innovation pipelines, as we have seen for Botanist, Brooklady, and also one for Mongay. Strong activation plans on Cointreau, a new listing on Saint-Rémy in the UK, have made it possible to sustain a good momentum while holding on to existing price point, even increasing compared to the previous year. Third region in terms of weight, APAC, in which we have China. China, we posted a very strong WGC decline the last quarter, impacted by continued stocking in whiskies, essentially, and a weakened demand, mainly from younger generation, which is proving to be more volatile for this kind of category. The rest of Asia was up a high single-digit in the last quarter, mainly driven by New Zealand, Singapore, and Japan, with San Remy, Brooklady, and Telmo, our champagne, outperforming. One last word. the record on the performance of the non-group rents, which now represent 2% of group sales, stable year-on-year, and they were down, non-group rents, 6.1% in full year 2022-2024. Last slide, and then I can drink water, not cognac. Slide 13, I would like to reconfirm our operating profit margin guidance, organic operating profit margin guidance that we updated at the end of October. In a nutshell, we expect a contained organic decrease in COP margin and now 7 to 10 million euro of negative forex effects. Throughout the year, we kept a very tight control on cost. We maintained a firm pricing policy and we reduced selectively our R&P, mostly for the economy division. More importantly, we are allowed We committed and we are realizing a cost-saving plan of $100 million. In parallel, we don't have to forget that we protected as much as we can our gross margin in a persistently inflationary environment and despite a negative mix linked to the underperformance of cognac and the performance, mathematically speaking, of the U.S. Thanks for your attention, and now I'm happy to answer to your question after a bit of water.

Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 and the telephone keypad. And in favor of allowing more people to ask questions, we kindly ask you to limit yourself to two questions only. Once again, if you would like to ask a question, please press star one. Thank you. We'll now take our first question from Simon Hills with City. Your line is open. Please go ahead.

Thank you. Morning, Luca. So a couple from me then. I wonder, firstly, could you talk a little bit more about China in the quarter? Clearly, the performance was certainly good relative to your expectations around Chinese New Year. But how did things develop through the quarter? I don't know if you can talk about in how the early part of the quarter compared to perhaps trends through March and as we peddle into April, because it looks like things have perhaps deteriorated a little bit from a consumer offtake standpoint. So just some general, broader comments on that. And then maybe sticking with the go-forward commentary, you know, sort of more generally, clearly the US was weaker overall than I think, you know, we expected from a depletion standpoint in Q4. If we have got a weaker exit rate, perhaps in China, coming into the new fiscal year. How do we think about fiscal 2025? You know, when I look at consensus, I think we're looking forward to the consensus of mid-single-digit organic sales growth a little bit higher, maybe sort of a 6%, 7% organic EBIT growth. Are you happy with where people are sitting as you head into the new fiscal year?

So with your three questions, we can last one hour, I guess. Thank you for your questions. So we start with China, as asked. So as you have seen, we are satisfied with the performance of China. In a nutshell, overall, our tagline, our press release is saying that sequential improvement, which is true, because compared also to general competition, we can say that we are doing better in China, we are doing worse in the U.S., and for Europe, considering the size of the region, the political sub-region, we are doing sometimes better, sometimes worse, but overall we can count less compared to our peers in Europe. So these are the general elements of the quarter. So coming back to China specifically, full-year sales were very strong, and the Q4 was clearly stronger, stronger, what I can see of some performance of all our peers. Why that was clearly different? some soft comp essentially in January and February, and then March we can compare things comparable, so those are a phasing positive effect in terms of comps, a 10 million euro positive effect, but if we strip out all that, it remains a very positive performance, either in Celine and in Strat as well. If you remember that, In the end of January, we're likely the next rate of depletion that we're cleaning up big time, the select of the stock that New Autumn Festival has determined. So that's the reason why we can say the soft Chinese New Year, it is being realized, is not better than soft, but is above expectation, clearly. And we are, I think we are very satisfied with that. Why so? We are not so much bullish on the future on China, because still we have to consider there is cash pressure in the trade. The high comps will be cycling in the Q1 and Q2 of the new fiscal year, and the level of confidence remains a bit blurred, a bit low. So we witness, we analyze, we dig in, we dissect the performance and we we interpretate the figures but for china uh we cannot be very bullish for the future. We think that we are doing more than fine, and if I can, I repeat, better than our peers. But we remain humble, not swagger at all, and we look forward to continue to increase our performance in China as best we can. We cannot commit to have this exit rate of the Q4, clearly based on China, also replicated in Q1 or Q2, the next fiscal year. In terms of In terms of brands and channel, I think that during the call, I gave also already some call. So I don't think we need to dig in more. Let's talk now about U.S. because it's clearly there that we still have a painful situation. So we are clearly experiencing huge comp compared to last year, also because of the Super Bowl, which is not there at the same extent. We are showing very good results compared to four years ago, but the reality is that the spark of the recovery, which is linked to the depletion, is not yet there. So this part is essential. Depletion needs to be positive again because all the math, all the compounders are linked to this indicator to be able to capitalize on confidence, on compounders, on sales, on activation that are showing that in a very clear way. So far it's quite the opposite in terms of depletion. Q4 shows a deterioration. So we have done the maximum that we can, and we'll be back on that point because it's important to highlight that, that so far the situation has been deteriorating in Q4 compared to the Q3. Why that? You want to give some elements on top of the depletion. Comps, I repeat, were very high on top of the Super Bowl. the promotional environment is not most mutant by the opposite. So we are facing also a fierce competition on that. And at the end, Overall, in the longer period, the strategic asset will remain what they are. In the short period, when there's cash pressure, in terms of return on capital rotation, in terms of wholesale, you might prefer brands that, with the promotional intensity, are showing faster cycle of selling to the retailer point of sales. And so indirectly is likely penalizing ourselves because being firm and strict on our – respecting our strategy is implying in the short term that we need to hold on. So on top, further deterioration in our opinion of the global U.S. spirits market. uh we are not yet out of the crisis in the u.s our better best estimation is they will be much more skewed on the h2 of the fiscal year 24 25. and u.s are so important they are so key that Five, ten points of different positive and negative can change all the group footprint overnight. So the volatility is very important. China is a very good news, but the U.S. needs to have a spark, a positive spark, which is in a nutshell negative. positive depressions in value, in value, in value. Some of you have done a very good exercise in terms of math so far this morning, name one essentially to UBS, very good one, but it's in volume. It's not in value. There's a huge mistake because we are, you can capitalize on value depression or creative impact. So, sorry, I will be a little bit longer because it's important. You can say that you are passive. You can say that you're waiting and see and look at the sky, nothing happens. And we are sticking to our strategy, so we are all the lazy guys that want to move. The opposite. We remain strict on our strategy. We remain strict on our baseline, on our credo, on our believers. So we change the maximum we can to improve the performance, and we are convinced that we start to bear fruits. changed the way they are doing A&P in the U.S., much more on BTL activation, moving the needle on the point of sales, and less on brand awareness. Because, as you've seen, and Eric is hammering on that, every time he's speaking, Eric Valla, So BHT, brand health, is the maximum level in the U.S. compared to our previous year. So strategy is there. The consumer top-of-mind knowledge is there. So probably we need to change something, and we are changing something in terms of activation, marketing, initiatives, to be more consumer-centric, a little bit less brand overall umbrella-centric. And then, without elaborating on the economics, which is not the purpose, we made some reorganization in terms of the way we are approaching our marketing in our states. It's not only an economic exercise. We're not doing that to have savings. Clearly, it's a secondary element. because we have to change from a regional standpoint for mirroring more the wholesaler organization so creating new responsibility a full p l is positive for our teams a more embedded integrated sales marketing e-commerce trade marketing a link to the wholesale footprint and as every change needs also to have some times to unfreezing, warming, norming, performing with the low. On top, there is an increased competition. So the time, I acknowledge that, is less fast than we expected. So we are not only wait and see in terms of altitude. We stick to our fundamental that we are moving. I acknowledge that so far, value depletion not showing what we want. It's the spark. The spark needs to be there. When you will have it, you will have some reaction that are going beyond the mathematical compounders. You will see very strong acceleration even beyond compounders. Sorry for this longer answer. So back to your third question, which is the consensus, the guidance, and so on. So let me start for the fiscal year 2022-2024. Top line is there. It is, as you highlighted, a small bit. What does it imply in terms of organic COP consensus? So far, the company consensus for the year is at minus 28.4%. The visible alpha operating profit consensus is minus 28.8%. I'm okay with the consensus. I'm okay. What does it mean okay? No more, no less. No more, no less. What's happening in terms of organic stage consensus for FURIA 2425? If you have followed me in my delirium and long, long answer, We have understood that we have a strong belief in terms of strategy, but visibility remains quite blurred. Volatility and fork, different fork performance between regions and brands quarter by quarter are blurring even more our global visibility. So at this stage, we cannot commit on any guidance. We have one positive element and one negative element to highlight. So let's start with the compunders of the consensus of the sales as are shown by the company consensus is at 4.7, Visible Alpha 4.5, and Bloomberg a very optimistic 6.3. On the positive side, we acknowledge and we highlight the fact that the consensus And it's now taking into account our natural growth armor rate of the high single digit that is clearly too optimistic for 24, 25. So it clearly less than a single digit. On the negative side, coming back to my point, visibility is very, very limited. There is fog. There is fog. I cannot say nothing more clear. I don't want to hide myself or say I don't give you this figure, I will give you this figure. The visibility is limited. I commit myself to be very clear what happened, what's happening. I cannot commit to something tomorrow because more than ever, what will happen tomorrow is unclear. The exact timing of the U.S. recovery is key. The spark, the spark so far, the best case scenario is a U.S. recovery in H2 of 24, 23, 24, 25. We settled that. We didn't even close the year in terms of the economics. And I'm sure from this point, with Eric, with Maria and Eli, during the full year result, we'll be back clearly. So far, I repeat, I cannot give you a specific sales guidance for next year. Visibility is very limited, and not only for something that belongs to our responsibility. Global macroeconomics is very complicated as well. Sorry for the longer delirium. That's great, Nico. Thank you.

Thank you. And we'll now move on to our next question from Andrea Pisacci of Bank of America. Kindly be reminded, this is limited to a maximum of two questions only. Thank you. Please go ahead.

Yes. Thank you. And good morning, Luca. I just want to follow up on the U.S., please. I mean, you've made it very clear that we need a spark for the performance to improve What do you see, what do you think could be the spark? What is needed sort of in potentially an H225? Is it an improvement in the environment in the U.S.? Is it promotions, promotions easing? I mean, nothing seems imminent as you're saying, but what do you think, what shape could this spark have? And this is sort of the second part of my first question, if I may, on the U.S., You say that to have growth in the U.S., I think, if I understand, you really need the spark. I mean, you need depletions to clearly inflect or turn positive. But in Q1 and Q2 in the U.S., if I haven't got the numbers wrong, you're up against some shipment comps of like minus 80 percent, minus 50 in the next couple of quarters. So on those comps, do you still think it will be, I mean, will it be difficult to deliver growth because of what is happening to depletions. And the second question, please, Ruka, is on cost savings. You confirmed that this year you'll be delivering the 100 million that you denounced. Now, some of these savings are temporary, but at the same time, you'll have a positive carryover effect into fiscal 25. So I was wondering if you could just give a bit of color on what cost savings will look like in fiscal 25, even if just qualitative. Thank you.

Thank you, Andrea, for your question. So, shape and natural spark. I cannot be more clear and if you want dramatic than that, was the positive depletion indicator. following all the activation, the change of execution in terms of how our team are addressing the market, conjoint plan with our war sailor, conjoint action by state, all that is there, is in place, is improved, is increasing. So we need to show that with figures to be able to impact on our compounders, starting with the saline, will be even more, even stronger than what the NAPs will drive. And this comes back to the second question. So your question is, you're phrasing the U.S. and Q1 as finger in the nose. So why you're prudent? Because so far the exit weight and the Q4 was bad in the fission. So even if you compare in terms of value of stock and volume stock compared to four years ago is lower, if you are a retailer, you give short-term priority to the most fast-growing, moving element of a portfolio that you have. So once again, depletion being depressed, do not announce even if on very easy counts to be very bold and positive. Clearly on the positive side is an opportunity. A clear change, I come back to the spark, can improve big time the future. So we could be more volatile, more on the positive side. I can commit to that? No. It is finger in the nose? No. It's not finger in the nose. Once again, Q4 showed a deterioration. I would have preferred to have, in a word, a slightly miss on the top line for the group, having improving depletion in the U.S. than Q4, if I had to choose. So that's the reason why you cannot extrapolate the minus 0.7 that we had the group level overall in the Q4 as the starting point of the Q1. We need to be cautious. I'm not there. I'm realistic. Cost saving, I confirm that the cost saving will be realized, will be much more precise, on nature, much more quantitative beginning of June. Part of that, more or less 60% highlighted, will be temporary, so will be back. So this is something that qualitative will have an impact on the profit and loss equation for next year. Because we do a lot of things to try to mitigate this automatically negative carryover because the long lasting are there embedded in the backbone of the new overhead footprint or OPEX footprint. but we cannot replicate the same level. So, clearly, there is a potential that OPEX next year will grow at a speed clearly at the same level, maybe higher than the top line, considered at the end what will be the next fiscal year. In terms of qualitative element, something that not everybody has caught, these are not net credit cost savings, the 100 million, gross savings. So gross savings. So it means that part of the $100 million also has been put to continue to finance some strong AMP, some strong manufacturing investment project, some strong OPEX, specific account recruitment. So it is a gross, gross global impact. Not a net one. It has been used also to improve the footprint of the profit and loss 22-24, as we'll see in one month, and we'll have the same effect next year. But the carryover is there. You're right. Thank you, Luca.

Thank you. And we'll now move on to our next question from Celine Panetti with JP Morgan. Your line is open. Please go ahead.

Good morning, Luca and Celia. Thank you for taking my questions. My first question is on the US. Can you tell us how big is the SOP now for the portfolio? And can you talk about the promotional intensity? I mean, you mentioned that it has worsened. I think you had promotion in the October, November, December quarter. What happened to promotion for you in this quarter? And so maybe coming back to my point on the SAP, I mean, what can be done really to make sure that you limit limitation impact from competitors being aggressive on pricing? My second question maybe is bouncing back on what you were just saying. Growth margin, you mentioned for this year, fiscal year 24 protection. In fiscal year 25, can you talk about, you know, can you continue to do that if you don't have a pricing benefit and with applying growth maybe below your algorithm, can growth margins still be flat in 25s? And then did I understand correctly that you are mentioning that some of those costs are coming back in the KNN4 on the SG&E line? Thank you.

Thanks for the four questions. And in terms of weight, it's lowering, and now less than 50% in terms of value, distance US in total. And clearly, as you highlighted, and it's very visible, our performance of the SOP last year and three years ago is worse than the rest of the remaining part of the portfolio. Clearly, we are doing much better with the other part of the portfolio, starting with $70.38. So it is still an important weight, but declining, which is part of our strategy indirectly, is a little bit sharper than what we want. I'm not saying that I'm happy with that, but it's less than 50%. So your second question in terms of promotion. The global environment increases, not reducing the promotion. We had some normal promotion in O&D, so no different than the usual one. Overall, I don't think that we can see easily a change of this promotional work in the next coming quarter, also because globally, The US periods can be flat, plus one, plus two, but we are playing in some category, in some segment, and we are clearly running worse than the average. So it's maybe one plus one plus two is including FTD and other categories that are more dynamic than CoinX so far. So I think that we continue to be a distinctive element of the market. And I repeat, we will not enter in this promotional war. As you have seen, we will be a little bit maybe less Optimistic in terms of price increase, we will moderate that. I like that for the gross margin. But we will play on skews, on ranges, more in the mix. But we will not enter on a face-to-face race with our major competitors or without naming one. The second one, which is very important in the U.S., only the U.S., but is clearly Very promotional, quite inconsistent in the prices state by state. If you enter in debt, you end up nowhere, having lost all your credibility. And we are doing the opposite. I repeat, the organization of the sales team has been done not for costing, also for efficiency and mirroring what we have increased in terms of distribution pattern and in terms of activation EMP as well. In terms of growth margin, as you have understood, we are – it's clearly more or less at the level of 2012, the target in terms of growth margin. We reached already a very high level. This year and next year, you will look as more opposed because there is a clear negative mix, even before pricing, linked to the performance of Cognac versus Lakewood Spirits, as well as a negative product mix in some other parts of the world, including China, because Club is clearly beating the SOP, but it's better to do even more of Exodia 13 than Club. So Club being our jewel has a slightly negative impact impact on the overall gross margin. And all that clearly is talking about gross margin in comparable environment. We are clearly not talking, it's on purpose, We are not neglecting that. I'm talking indirectly to the Barclays note now. I'm not neglecting that it is a threat. That is not a glove in our hands. So MOFCOM investigation, we are doing what we can. We are part of the three sampled company. We think that we have done everything correctly. By the end, you know what, I cannot master that. On a comparable basis, we are also, coming back to your question, a gross margin level already at more or less 2030. So this year, next year, will be a bit more temperate. I cannot be precise at this stage. It depends on what will happen by brands, by companies. by region, and also the fact that the saving, part of the saving that has been done this year, the lasting one, on the manufacturing side, on the logistic side, and we cannot replicate this kind of saving forever. So a little bit more moderate. And at the same time, last to your question, as you highlighted, there will be a negative carryover in terms of OPEX for the past 60% of the $100 million, so more or less at this stage $60 million, but we'll be more precise at the end of the year, in terms of offers that will be back. Does it mean that we will witness the profit and loss declining eventually in gross margin, increasing in OPEX and modest top line and then declining bottom line? No, no, no. We will not witness that. So potential other plan of specific improvement to the profit and loss next year on all lines. And don't forget, A&P are moving more on the efficiency level. our actual situation is calling for priority choices.

Excellent. Thank you.

Thank you. And we'll now move on to our next question from Edward Mundy of Jefferies. Kindly be reminded, this is limited to a maximum of two questions. Your line is open. Please go ahead.

Yes, I will keep it to two. Luca, thank you so much for some very interesting color. Just to sort of recap, because there's a lot here. On the U.S., one of your competitors is starting to see flattish consumption in the first quarter calendar and reasonably low inventories. And their spark, I guess, is to have cut prices. And it's pretty clear you don't want to enter into a promotional war. But is there a tipping point where you start to become a bit more promotional to find that spark? which then allows you to accelerate sell-out trends and then allows inventories to be cleaned up. And I appreciate there's a bit of a balance between sort of the long-term and short-term, but is there a tipping point where you start to cut price and then we get the inventories through, number one? And then number two, Just to sort of pick up on your last point, so I understand it correctly, that you do not expect to see declining bottom line in 2025. In other words, are we close to reaching a floor on operating profit, do you think, and operating profit won't go down in 2025? I just want to sort of clarify that.

On behalf of U.S., even if the promotional intensity is slowing down quite the opposite, it is creating more negative buzz and also reducing, as I try to explain, our leadership call for the World Seder because we are moving less fast than our peers. We will not increase our promotional intensity. we'll be reducing our price increase. We'll be more playing on SKUs. We'll be more value for money in terms of offer, but no promotion. So mix, potentially, yes, no promotion. And lots, it is in our hopes and wishes and plan for this new organization that is developing near nearest to the trade than before i fit we count on that and amp that are much more linked to the depletion activation and if you want volume moving then in the past two or three years eht brandel tracker grant us that we have the capital that is still there and he's there he's more much much more than ever so no a promotional like that that's less price increase and a more direct efficient impact of all touch points on a point of sales so we want to speed up the depletion rate so we can we are trying to improving increasing uh the odds to add the spark spark needs also that I need to try to do that with my end, and then the end, the spark will be there. In terms of bottom line, it is too early to talk about that. Otherwise, it's a guidance. We'll talk about that in June. But this year, as you've seen, we have reducing. minus 28% to 28.5, .8, but reducing operating profit more than the top line, meaning that the profitability is declining in a contained way that is declining. We don't want to do that at this stage for next year as well. So we do all we can without entering into specific figures to avoid the decline of profitability next year. That will be more precise with the RIC because at the end, everything depends on the top line. I can do whatever I can, the maximum as financial directors, but with minus 19% of top line, there is a limit also to the improving action. Top line needs to be there a bit more than the RIC. Thank you.

Thank you. And we'll now take our last question from Jen Cross with BNP Paribas, saying your line is open. Please go ahead.

Good morning. Thank you for the question. I just back on U.S. cognac. So I mean, the police have been obviously quite negative for some time now. And you mentioned that wholesalers are prioritizing some of the faster moving brands. I just wonder if you'd comment on whether you're seeing any impact in terms of the shelf space being allocated to the overall category and for Remy Martin. That's my first question. And then just briefly on the liquors and spirits division, you commented in the media on fiercely competitive environments in soft markets. I just wonder if you could share some color on whether this is quite widespread or it's more intense in some specific markets.

Thank you.

Thank you for your question. I get the first one. The second one, you can repeat. The cell space, there is some more debate, clearly. It is a little bit state game, maybe more in some state when you are for most priced skews behind the glass, so in a specific environment, would need to be preserved. And the other part is quite the opposite. You can see very easily. that the subspace is there, but our products are not present because the wholesalers did not refurbish that. So it is more state by state, but we don't see this risk so far in a clear, important way. It's not an issue so far. And can you repeat the second one, please?

Yeah, sure, thank you. It's just on the liquors and spirits division. I think in the MIA you commented on, in the presentation, on a fiercely competitive environment and some soft markets. I just wondered if you could comment on whether that's quite widespread across Europe or it's in specific markets that you're seeing that?

It is a big... All around, some markets in which South Europe has a stronger on-trade performance is a little bit more moderate. In other ones, like the UK, Belgium, where there is more off-trade classical footprint, it is bigger than in South Europe. But overall, there is very strong competition in terms of promotional and inflation impact. So it's causing... Instability in terms of expectation and realizations can be far higher, far lower. So it's more that the point which is annoying. In years experiencing, even if it's the third region in terms of weight, more than the previous year, change in discrepancies between forecast and realization. And it's not only in the negative side. It can be also in the positive one. It's been this year in the positive one. It's the example in the last quarter where clearly the serene performance was beating what at the end we discovered being the depletion rate. So it is more complex to manage and is a high impact. competitive price position is increasing even more this volatility. On top, it's not a mystery that we have a portfolio which is even inside the conspiracy. It is not comparable to some of our peers in terms of size. So we are Apart from Metaxa, Cointreau, other brands are, in our whiskey, other brands are less important in terms of fight face-to-face. There, compared to the previous question, we need to be aware that there can be a self-paced game, more than in the U.S. cognac. But we have a team which is highly reactive in Europe. It is clearly on the board every day because it's not the fact that they are the smallest division makes their work the easiest one, quite the opposite, because you have a lot of countries, a lot of brands, a lot of priorities. It's a very, very complex job to be in charge of a near region and sub-region. Thank you.

Thank you. I'm now happy to hand it back to Luca for closing remarks.

Thank you so much. Have a nice day. See you in a month. Take the light fire because I need the spark. I want the spark to be there. Waiting for the spark at the beginning of June. Thank you so much. Have a nice day.

Thank you, Luca. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.