Remy Cointreau Sa Ord

Hello and welcome to the Remy Control Credit Tree Sales 2425. My name is Caroline and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen only mode. However, you will have an opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. We kindly request you to limit the number of questions to 2 per person. If you require assistance at any point, please press star 0 and you'll be connected to an operator. I will now hand over the call to your host, Luca Marotta, the CFO, to begin today's conference. Thank you.

Good morning, everyone. Thank you for joining us today. As highlighted in our press release, Q3 sales declined by 21.5% organically. This performance reflects several key factors. First, high comparison and ongoing stocking in the U.S., despite a slight sequential improvement in volume depletion from Q2 to Q3. Second, challenging market condition in China in APAC trade retail. Third, a significant sequential improvement in the rest of the world, including Europe and the rest of Asia, which returned to growth in Q3. And fourth, last but not least, a positive calendar effect linked to Chinese New Year, which is earlier this year, more or less 1.5 points in Q3 at group level, representing in absolute value around 5 million euros. So far, trends for Chinese New Year are soft but slightly better than our initial expectations. Futury sales decline is broken down as follows. Volume decreased of minus 13.8% and minus 7.7% of price mix effects, largely driven by the underperformance of high-end brands. Lastly, the cost-cutting plan is progressing well in line and in line clear with our roadmap highlighted some months ago. Looking at the overall sales performance by region, Americans recorded a very strong double-digit decline over the nine-month period, primarily due to, first of all, high base of comparison. As you remember, most of the H2 US shipment occurred in the Q3 last year. Second point, a continued stocking, although volume depletion showed slight sequential improvement but still in negative lands. APAC sales decreased by a high single digit over the nine months due to tougher market conditions in China. Conversely, the rest of Asia showed strong improvement and returned to growth in Q3, led by Lycoris and Spirits. Always regionally speaking, EMEA declined by a low double digit in nine months, but showed a sharp recovery in the last quarter, in Q3. This was driven by lacrosse and spirits returning to positive territory and a reduced decline in cognac division. This was sell-in shipment. In terms of the best approximation of sell-out, so value depletion at group level over the past nine months, in the US, value depletion declined by mid-teens, year-on-year, in nine months, including a high single-digit volume drop. Compared to pre-COVID, nine-month value depletion are down low single-digit, but out of the SOP, excluding the SOP, increased by around 40% in value. In China, value depletion were flat year on year in nine months, but grew, so They've been increasing by mid-single digit in Q3. On a five-year basis, nine months value depletion in China increased by over 20%. In EMEA, value depletion decreased by mid-single digit year-on-year, but grew, increased by mid-single digit in the last quarter, excluding Russia, to be a bit comparable, geographically speaking, nine-month value depletion are up mid-single-digit in Europe compared to pre-COVID levels. So what we can say, making the global analysis, that overall, group value depletion fell by a single-digit year-on-year, more or less minus eight, over the nine months, outperforming, clearly, selling trends without minus 17.8. And on a five-year basis, value depletion grew by low single digit, a little bit less than 2%, exceeding selling trends that are overall negative over failures of around minus 4, minus 3.9. So the message is that, thanks also to what's happening in the last quarter, last month, we are performing better in the last part of the chain. The more we are near to the consumer, compared to the saline. So, still the stocking, but if there is no spark in a clear way visible, we are starting to have some, to bear some fruits in terms of depletion, value depletion dynamics. To conclude on this very first slide, we reconfirm our full year guidance for both top line and bottom line. Based on our nine-month sales performance, we expect to reach the lower end of the sales guidance range, i.e., close to minus 18% in organic terms. On slide three to five, I'd like to, as usual, briefly highlight some of the key marketing initiatives undertaken during the quarter. Slide three, let's look at what happened in November. In Vegas, we relaunched our Louis 13 pop-up store during the Formula One Ultimate Race at Wynn, Las Vegas. This retail activation showcased a wide range of Louis 13 offerings, including the Iconic Collection, Drop Collection, and Rare Cask. We also provided exclusive accessories and personalization services, which resonated well with our target audience. These initiatives delivered impressive results with double-digit sales growth exceeding our initial projection expectation. While the financial contribution to overall U.S. sales is modest in absolute value, this activation remains a very powerful tool to strengthen Louis XIII brand equity and reinforce its premium positioning in this very important market. Going to page number four, let's discuss China, with a focus on e-commerce, one of our most strategic direct channels. Despite the challenging market environment, e-commerce continues in China to perform strongly, with sales growth of plus 10, more or less, during this quarter. This was driven by key activation during the Double 11, 11 November Festival, and Super Brand Day, held on December 18. Both campaigns were hosted on our flagship platforms in TimorHD.com, leveraging innovative live streaming from the Remy Martin House pop-up store in Shenzhen. This pop-up, strategically located at the Shenzhen Bay Opera House, celebrated our 300-year heritage and bridged the gap between our roots in cognac our growing presence in China. The fourth boosted our e-commerce performance and both special occasion, Superbrand A111 recorded a double-digit growth compared to the previous year. So once again, I repeat, every time and clearly in China, we are in direct touch with the final consumer, we continue to perform in a very positive way. Lastly, on slide number five, I'd like to touch base on Metaxa, our Greek brand, which achieved outstanding results in the last quarter, particularly in the EMEA region, which is a very important region for this brand, where sales grew by over 20%, 2-0. This success reflects the team's effort to rejuvenate the brand's attracting younger demographics while at the same time elevating the portfolio of these specific brands. An example is the launch of 12-star Zeus, the first ever limited edition of the 12-stars range. Released in September, these exclusive products saw more or less 50,000 bottles distributed across key markets such as Poland, the U.K., Greece, and Czech Republic. Now, let's turn to slide number six, back to figures. Nine-month sales amounted to 77.8 million euro, representing a year-on-year decline of more or less 170 million, 168.9 to be precise. or minus 17.7 on a reported basis. This performance was shaped by the following factors. First of all, strong organic decline of 117.1 million euro, i.e., minus 17.8 of organic sales decrease. Performance is split between a minus 13.6, a negative volume effect, and minus 4.2 of price mix. The price mix negative amendments. Why? Result from a slight negative pricing effect and more substantially by low to mid single digit negative mix effect. Why? Linked to the underperformance of the end product and to a lesser extent, but clearly important, the cognac division. We still are mainly a cognac company. So, if we are growing more Duolagos and Spirits for the dynamic valorization at the end specifically, is bad compared to the Konya growth. Second, we recorded a slight positive currency translation impact of 1.3 million, so positive one, or 0.1 gain for the nine months, the first since a while in terms of conversion. This gain was mainly driven by the improvement of British Pound, more or less 1 million euro, and US dollar for the same amount. However, these gains were partially offset by negative impact from the Japanese yen, more than half a million euros, and Chinese renminbi for the same magnitude in terms of absolute value. Layer number seven, an important slide. We provide a breakdown of performance by division, as always, compared to the nine months of pre-pandemic, so 19-20. And you can read the spreadsheet, but I'll summarize the key triggering points, the key highlights. In a nutshell, cognac volumes declined significantly in the current U.S. environment, clearly, although price mix effects remain very strong over five years. Overall, total cognac sales were down 16.3% versus pre-COVID-19. while value depletion were slightly better, declining by low double-digit. At the same time, we have the opposite effect. Lycos and Spirit Division sales showed a significant growth of 34.7 compared to pre-COVID, driven, and this is very interesting, both by volume and price mix. Sales are below the value depletion trends, which grew by over 40% over the same period. The trends we highlighted for the short term are also visible, accountable for the comparison to five years. So, and we'll be back to that in the Q&A, I'm sure. When we talk about stock, don't forget, absolute value of stock are lower than five years ago, are lower. At group level, these figures reveal a divergence, a difference between selling Minus 3.9 and very depression, slightly up, almost 2%, emphasizing, so I re-ask this concept, I admit, the better resilience of the end market demand compared to nine months cumulative end of 1925 years. Now, digging more analytically on the organic trend by region at group level. Let's start with APAC. APAC nine-month organic sales declined by high single-digit year-on-year, but increased by around 20% to zero on a five-year basis. In terms of volume-value equation dynamics, year-on-year performance was only impacted by the value component driven by the underperformance of high-end brands and ranges. In China, sales were down low double-digit in Q3, amid challenging market conditions, tougher market conditions, particularly for the high-end segment. However, as already highlighted, direct channels were more than 45% of sales in the last quarter, and if you consider the nine months, more than 130%. And this channel proved to be resilient. rising by strong double-digit e-commerce, 10% in the quarter, supported by double 11 and super brand events. And as a consequence, e-commerce penetration for China reached nearly 30%, 3-0 sales by the end of December, nine months. But considering only the quarter, the overperformance is clearly visible, plus 10 on a negative. It was around 40%. Beyond the decline, so in a correlative way, of the indirect channels, overall performance was also affected, negative speaking, by the continued weakness of the Hong Kong market and softer trends in APAC travel retail, where travelers have returned but are spending less. This was sell-in. On a more positive note, value depletion in China showed encouraging and the other way around trends. Up mid-single-digit in the last quarter, bringing the nine-month performance to almost flat value. On a five-year basis, nine-month value depletion increased by more than 20%. Given the stronger resilience of depletion compared to Celine, inventory levels remained in China and APAC generally healthy at the end of December. Elsewhere in the region, so out of China and travel to APAC, rest of Asia returned to growth in the last quarter, increasing by no single digit, primarily driven by Australia and New Zealand, with strong performance in Lagos experience. Admittedly, it was time to do that. They were responding positively since a while, so they are more than welcome. By the end of December 2024, APAC region accounted for 42% of our group sales, four points more than the previous year. Second region by importance, the group level is the Americas, in which nine months organic sales declined by a very strong double digit. And compared to five years ago, is the opposite of a pack. It's more or less minus 20%. Year-in-year performance includes a very strong double-digit negative volume effect and a mid-single-digit negative price-miss impact. Why? It's more reflecting an unfavorable mix of products, views, states, and formats. In the U.S., inside the Americas, sales declined by a very strong double digit in Q3, driven by two factors. First, extremely high comparables. The majority of the H2 shipment in the U.S. last year were concentrated in the Q3. And second point, another round of destocking due to continued weakness in value depletion. not in terms of dynamics or sequential improvement, in terms of absolute value. Down mid-teens year-on-year for nine months, equivalent to a low single-digit decline on a five-year basis, but plus 40% when we exclude the SOP. This performance, the quarter, this partial cash-up and sequential improvement, was clearly driven by the non-Cognac brands. In this context, inventory levels in the U.S. stood slightly below if you want to shoot a number of five months by the end of Q3. But as I said, not the same absolute value as five years ago. In Canada, sales experienced a sharp decline in Q3, while Latin America, the opposite, recorded strong double-digit sales growth supported by Cognac and Los Alamos spirits. There again was to bad quarters before, so they are more than welcome. By the end of December 2024, America has accounted for 35% of our group sales, down 5 points a year. Finally, in a big Europe region, EMEA, 9 months organic sales were down by a low double digit, and around 5% versus 5 years ago, reflecting primarily a negative volume effect. But EMEA is a big region, so we have to dig in a bit more on the sub-clusters. So third-party distributor cluster achieved mid-single-digit sales growth in the quarter, led by Germany, Czech Republic, and Poland. At the same time, sell-out trends turned positive, driven, as already highlighted, by Metaxa. UK and Nordics, sales rose by low double digits in the quarter, benefiting from favorable comparables and market share gains due to a robust, solid activation plan during O&D, October, November, December. Benelux and France, the opposite, Q3, sales declined mid-teens, impacted by competitive promotional pressure in cognac and persistent soft trends in liposome spirits. Last but not least, AMI and CIX, XCIS, not Russia clearly, we don't sell in Russia, sales fell by low single digits in the quarter, reflecting continued stocking and very intense promotional activity, particularly in South Africa, where the market remains, as you know, heavily focused on BS, a category in which we are not playing. Over the nine-month period, value depletion in the region, so not sell-in, but the best approach of sell-out, declined by mid-single digit, but improved by mid-single digit in the quarter. So, a change of rhythm. On a five-year basis, excluding Russia, nine months value depletion would increase by mid-single digit, boosted by Lycos experience. Overall, inventory levels remain healthy across most areas. end of December, the EMEA region accounted for 23% of group sales, up 1 point compared to the previous year. So, plus 4 APAC, plus 1 EMEA, minus 5 point Americas. Let's now turn to slide 9 and the rise by division, starting with Cognac. Cognac division posted a 9-month organic sales decline of minus 19, driven by a minus 14.7% drop in volume, and the negative price mix of 4.3%. End of December 2024, cognac accounted for 63%, so a little bit less than two-thirds of our sales, down one point compared to the previous year. Let's start with APAC. APAC, inside APAC, mainland China. Sales declined by low double-digit in Q3, impacted by challenging market conditions, the domestic market, and softer trends in travel retail APAC. As already said, announced that indirect wholesalers and not directly in touch with consumer channels were the most affected due to continued cash flow pressure, waving on wholesaler confidence and their ability to place orders, and carry stock. This was further influenced by the transition in the 2013 business model. As a reminder, we are significantly reducing, and we had already, the number of wholesalers a few months ago, more or less one year, to retain only those meeting specific requirements, increasing the direct touch with the consumer. On the other end, direct channels performed robustly, including e-commerce, Louis XIII direct freestanding stores, e-boutiques, and PCDs. Talking about ranges and brands, Club, Remy Club, demonstrated greater resilience with value depletion up 20% in value. In the quarter, at almost 100%, so doubled, on a five-year basis, while at the same time, high-end brands remain impacted by a bit of luxury shaming. Elsewhere, as said, Hong Kong underperformed. Taiwan and Macau deliver growth. We are happy with that. A strong growth in both saline and depletion in the quarter. Overall, despite very challenging, tough context, Value depletions for cognac in a pack in Q3 rose by a single digit year-on-year, bringing in the nine-month performance in China to almost flat in value. On a five-year basis, I repeat, this is equivalent to more or less 20% both in the quarter and the year-to-date in a month in China for cognac. The rest of Asia, cognac sales declined by a mid-twice single digit in Q3. with Japan, Malaysia, and Singapore facing strong competitive pressure from promotion, from the promotional environment, and softer trends in China's tourism, as already highlighted. Second region in terms of weight, considering Cognac, is Americas. Let's start with North America, so U.S. combined with Canada. Cognac has failed by a very strong double-digit in Q3, affected by high comparables, and continued stocking due to that are improving sequentially, but still in negative land, considering a softer comparison. So the absolute value are not yet meeting the expectation. It's going better, but not yet the expectation. Q3 US value depletion declining by mid-teens year-on-year with contrasting trends across trades. Control states outperformed with volumes almost flat. And VSOP returned to positive growth. It's important. Control states are always considering the low stock a first indicator of what's really happening in the market. So we consider that a good news. Open states, conversely, were more significantly impacted and more by negative theory and clearly mostly by Illinois and New Orleans. Given these factors, cognac inventory coverage was slightly below five months at the end of the quarter, and if we consider the 12-month rolling value depletion, we have two points of negative price-mix effect under December, but on a five-year basis, price-mix remains up 13 points on cognac in terms of value depletion. In Latin America, sales rose by a very strong double-digit QO in the quarter, driven by strong performance in Mexico, Central America, Caribbean, and particularly for Remediosop and Ixo. So, more than welcome. Third region by weight, Cognac is an EMEA, where Cognac sales declined by a low single-digit in Q3, mainly due to intense promotional competition across most markets. UK returned to growth, up strong double-digit, supported clearly by favorable comparables, and the success of new activation plan implemented a few months ago. And sub-cluster European third-party distributor performance was negatively impacted by Germany, the stocking in Czech Republic, following a distributor change at the beginning of the year, and weakness in Austria. In Africa, in May, sales declined by mid single digit in the market essentially driven, as said, by VS, a category, a championship in which we are not playing. Lastly, EMEA value depreciation, so best approximate sell-out, outperformed sell-in for Cognac and returned to growth, up low to mid single digit around the quarter, but still very negative on a five-year basis. This was the The cross-analysis will connect the vision, dig into the three regions. Let's do the same thing on Lycos and Spirits, which was clearly more dynamic in the quarter. Lycos and Spirits individually reported a minus 14.9% organic sales decline in nine months, driven by a strong volume decrease of minus 12.2% and a negative price mix effect of only 2.7%. At the end of December, Lycosis Field Division accounted for 35% of our sales, up one point compared to the previous year. What happens by region? Let's start with the first one in terms of weight. These are the Americas. North America sales were down very strong double digits in the quarter, primarily due to a very challenging base of comparison and increased caution from more sales aiming to optimize inventory. levels in a slowing market. Despite these challenges, underlying trends showed strong resilience with sequential acceleration. Going through Q3, U.S. value replications were up by a single digit year-on-year, and more or less 80% more than Q3 1920, 80, almost a double. Botanist and Brookladdy delivered strong growth year on year at plus 10, plus 20 respectively. So on a five-year basis, we are talking of plus 90% plus case, plus 50%. And on top, price mix was flat compared to last year for the 12-month period ending December 24, but increased in terms of value depletion by around 20 points, 19, on a five-year basis. In Latin America, sales rose by a very strong double-digit in Q3, driven by a contrasting performance in Puerto Rico, Mexico, and Brazil. The second region by weight is EMEA, for Lycos and Spirits, where sales increased by a mid-single-digit in Q4, showing a strong sequential improvement from Q2, driven by growth in the UK, Germany, Poland, and Italy. Value depreciation were in line with CELINE, so growing, accelerating to mid-single-digit year-on-year in Q3. It's more or less plus 30 compared to five years ago. Breaking sales down further, UK posted a strong sequential acceleration, low double-digit in Q3. Same reason for the CONIAC, easy comps, a success, a strong success of OND, October, November, December activation plan across three brands, for Lagosan Spirits as well, but mainly Cointreau, Saint-Rémy, Botaniste, Monde and Thermo Champagne. And in parallel, Europe third-party sub-cluster sales increased by mid-teens in sales, so very strong growth for Lagosan Spirits, boosted by strong performance from Metaxa, Germany and Poland, Cointreau and Saint-Rémy. Third region by weight for the Lagosan Spirits, APAC. Inside the pack, let's start with China. Well, sales grew by mid-teens in the Q3, driven by Cointreau and some positive phasing effects on Brucladi. Overall, Q3 value depletion was strongly positive here and there on Cointreau and on the botanist, but still under pressure on Brucladi, which is in line with the whiskey category dynamics in China. Most prestigious qualities of whiskey. Overall, Q3 Lycos and Spirits China value depletion were down mid-single digits year-on-year, but up more than 40% on a five-year basis, bringing the nine-month performance to flat year-on-year and run press-turvy compared to five years ago. Rest of Asia for Lycos and Spirits were up mid-teens in the Q3, led, as said, by recovery in key markets like Australia, partially New Zealand, In Japan, sales were more impacted by negative phasing effect related to whiskey, but Thelmont showed a solid momentum from Thelmont Champagne. So, we are missing 2% of the group sales. They are non-group brands. They are representing 2% of the group sales stable year-on-year. They recorded, so, a decline of minus 26.5% in nine months, and minus 26.7 compared to five years ago at the same period. To conclude on slide number 11, and then I'll give you the mic for the Q&A, I would like to confirm the guidance. Slide number 11. Basically, for this year, we expect sales, shipment, top line of our P&L, to decline organically between 15% and 18%. Given our sales performance over the first nine months of the year, the group expects its full year performance to be at the lower end of the range, so closer to minus 18 on an organic basis. And what about the bottom line? We expect to land between 21% and 22% of operating profit margin in organic terms. based on recent evolution of our main currencies, the group now expects FX rates to have a positive impact for the full year, both in sales and operating profit. So we are changing, we are updating the guidance in absolute value. In terms of top line, we will be positive between 2 and 5 million, thanks to the H2, as you witness in the Q3 is visible, and positive between the 5 and 10 million on operating profit primarily accounted in H1. As already said, these 24-25 guidance, top and bottom line, takes into account the recent MOTCOM decision based on the information that we had as per today. The impact for P&L is marginal for this fiscal year. And last but not least, we reconfirm our 2930 mid-term guidance. Thank you for your attention. Now I'll be very happy to answer to your question.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We kindly request you to limit the number of questions to two per person. We will take the first question from line Edward, mind you, from Jefferies. The line is open now. Please go ahead.

Morning, Luca. Thanks for taking the question. I've got two questions, both around Sparks. I know we can see that the sell-out trends are better than the sell-in trends, and you're talking to inventories being healthy across Semia and Asia, and getting on the right track within the U.S. But if we take both China and the U.S. and talk about sparks, you know, you saw value depletions up mid-single digits in the third quarter. Could you perhaps talk about what's behind that and, you know, to what extent do you think that's sustainable is the first question. And then the second question is on the U.S., you know, where you're talking about some – improved performance in certain states, but the open state still being quite tricky. Do you think that also constitutes a spark, and are you seeing any green shoots in the U.S. on Cognac?

Thank for your question. So I will use your question to explain a bit wider way what's happening in the current trading in China and the U.S. So maybe it would be helpful for everybody more globally. So what's happening in this moment in China? The Q3, they say, were down low, low double digits. At the same time, depletion were up mid-single, clearly, with a very strong performance in terms of channel by e-commerce, in terms of product, but club. Whilst the indirect channel was suffering, because there is less confidence than cash, and the highest part of the portfolio was also suffering as well. Black Cross and Spirits, mainly Cointreau, and partially some specific SKUs of Google Cloud, it's more a phasing effect, outperformed. It is an interesting point of diversification, but in terms of absolute value, as you highlighted, China global performance and China current performance give the same figures. China is still all about cognac. Value replications in China outperform sell-in. So the question is, why? Consumers are more active than intermediate layers. Consumers, so far, are still liking our product. Consumers are more dynamic than our direct partners. Why that? Because they are sleeping now. Because of cash pressure. And there is a foggy environment with a lot of macroeconomical, macropolitical elements that are waving on that. So to be a bit more precise, so by channel, I repeat, we show the performance in the quarter that we never achieved before, 45% of sales. Think also to the weakness of the global denominator, but 45% is more than 50%. We are not supposed to be a direct brand, so it's something which is very positive for our relation with the consumer, also for the P&L, because we can have a fixed cost, and we have increased the brand awareness. Clearly, e-commerce continues to hammer that, and boutique, our freestanding store, accelerating, generating strong growth. PCV also, we are more complicated, are catching up, and What does it mean? You see, they are there to sell the highest brand, the highest ranking, which is suffering. They are suffering globally. So inside the global negative figures, there is some positive element. I will not call it a spark in terms of dynamics on the quantitative footprint, but they are positive. On the negative side, indirect channels underperform, impacted by cash flow pressures and the global environment. They are waiving prices. more on the enthusiasm and the dynamics compared to the figures. If we remain to strict figures, we should have better performance in the Q4. And as you will see, and I will highlight later, Q4 will be a very negative quarter for China. Off-trade was impacted by soft start in banquets due to the IPOs promotion on Ixo. And at the same time, on-trade was better than the past, more dynamic, but still very small basis. We were 5% and we are 10%. And important things that we need to highlight in a quantitative basis is that give also the sense of what's happening, that waving the more confidence. Softer selene is due also to some collateral anti-dumping investigation effects. Not only rational. Difficult to understand the rationale behind that, but this is the way it is. So cognac category, for instance, in duty-free, so now, is not allowed to refuel duty-free channels. It is, I don't know why, it is totally legal. I don't think so. That's the way it is. It is something that it is linked as a collateral impact of the anti-dumping investigation effects. This wasn't clearly manageable for us and the Q3, also for peers that have a lot of stocks, more than us. But we should see a catch-up in Q4 if the situation normalizes. But nobody knows. My message is that the anti-investigation have also some hidden impact on the dynamics of the next future. I cannot measure this potential and negative factor decision last in Q4. I only wanted to share with you this point because it was not clearly highlighted so far in the market. There are some collateral impacts of the anti-investigation effect that are starting to wait on the duty-free. It is important to say it. Coming back to brands in China as well, Club was hammering, plus 20% in Q3 and almost 100% of regular basis, more complicated on the higher end, and very good performance of Lycos and Spirits. And to end this very long and articulated answer on China, giving also some additional hints that I think you don't have it, let's talk a bit of Chinese New Year. Today. It's today, the year of the snake of wood, which is my year. I was born in 1965, the same year. Chinese New Year is earlier, 29 of January, compared to 10 of February. This way, in technical calendar, increasing the Q3 for 5 million. Last year was negative for 8. So this is part of the answer to the Q4. you have a reverse effect. Last year, we had a positive impact on the Q4 for China, 8 million. This will be a negative for 5. So it's 13 million. I know that I'm talking small figures for our peers, but we are a small company. So 13 million at our scale, it's waves. This technical calendar effect of 5 million will impact a group level 1.5 on the quarter, 4.5 points for APAC. and 2.5 for the cognac. We can qualify the Chinese New Year so far as correct, a bit softer overall, but better than expected, and up, so growing compared to last year in depletion, sell-out so far. So if we are breaking down, analyzing the performance of the Chinese New Year refurbishment and selling scores, the more we are going to Tier 2 and the retailer, the more the performance is positive compared to last year, witnessing the fact that the first layer, the Tier 1, are more concerned by global situation and have a cash pressure limiting the stock. That is clearly the situation which is far better than what we experienced in the U.S. in the last two years. In China, what we are saying is we are performing better and on a constant basis in depletion and sell-out compared to the sell-in. So the restocking or sell-in dynamics will be facilitated by that. This is, I think, a nice transition to the second question. What is the current trading? What's happening now in the U.S.? ? In the U.S., Q3 sales were down very strong double-digit, while value depletion were down more or less minus 10 year-on-year and down mid-single-digit of five years. This was, so, an improvement. The nine-month sales were down very strong double-digit, value depletion down mid-teens because there is a catch-up that's still negative. Let's look at the positive thing before the negative one. Value depletion outperformed were better than selling. Why? High comps in selling. Last year, we invoiced more or less the big part of the H2 and Q3 and continued the stocking. On a sub-channel point of view, before states, retail chains are now overperforming the intervented store. This can show that big chains retailers seem to finalize their stocking but it is still ongoing for independent store where we are the most exposed. So that's negative for us. At the same time, it's positive because the final dynamics change more than independence. But for independent, we were always a treasure for Rémi Cointreau, and we always said that we are not witnessing accounting that in a correct way. We are a bit late in terms of performance, so the stocking is still waving on them. Then, switching the analysis by states in terms of depletion, more than saline, we have, let's start with the positive, some positive signs. Controlled states outperformed with volumes almost flat driven by Michigan and Pennsylvania. So big states, top five. The SOP returned to growth in volume in Q3. Positive. So, okay, still very far from five years ago. That is part of the strategy. On the negative side, open states were more negative, impacted by two important states, Illinois and New York. While slightly positive, Florida and California returned to growth in Q3 in volume, not the same time in value, but in volume. So different performance that are contributing to the sequential improvement, even if this positive element are not yet qualifying for a spark. There is an improvement. There is no fire. It's still cold. Focus cognac. Like what happened specifically for the cognac. Because now we need to split in the U.S. Because the car of Lycos and Spirit and Cointreau is going faster than the cognac. So we need to be more analytical, I think. Let's talk about cognac in the U.S. Selling was down strong double digits in the quarter, affected clearly ICOMs and the stocking. But Q3 value depletion declined by 10 here and here, with contrasting trends across states. So the minus 10 is more driven by likers and spirits over performance than cognac. And it is something which is a touch more negative than positive, also for the P&L in the future. So, given this factor, cognac inventory coverage is more or less slightly below, slightly bigger than five months, has not moved, but in absolute value is far lower than five years ago. On a positive side, sorry for this long answer, but it's important to give you the whole picture, because otherwise you will not understand why we are saying that we are bidding in sell-out our Celine and we are now at the bottom of the range. So we are sending, if we do not explain, counterintuitive messages to you. So we need to explain why we're more cautious for the Q4. For Lycos and Spirits, Selene, we are down very strong double digit in Q3 due to very challenging base of comparison and increased caution from Wholesale and aiming to optimize inventory in a slowing market. And I repeat what I said two calls ago. The cognate is so important in the U.S., it's overshadowing a bit also the mechanics of Lycos and Spirits, sometimes also Cointreau. So the world sailor footprint sometimes is a little bit too massified, and they don't enter in the analytics or details of the reordering pattern they should be. Despite this challenging, underlying trends showed stronger resilience with sequential accelerations. starting with Cointreau. Cointreau Q3 US depreciation were up high single digit, up high single, and plus 80 compared to five years ago. Bottens and Brucladi as well, very strong, clearly helped also by some new point of sales compared to five years ago, but the velocity also is positive as well. In a nutshell, to answer in a very long way to your question, There was no spark yet, but the slight sequential improvement of the overall meteorological situation. Is this enough? No. It less than our expectation. So that is why we are cautious, guiding for the end of the year, remaining on the range. So we are still in the same guidance, but we precise the time of saline. We are more at minus 18 on top line. And bottom line, if there will be a question and a consensus, we answer, it is between 21 and 22. And we will see during the quarter, which is crucial to determine the final balance of the profitability as well. That's the reason why you have this answer. Q4 would be important. Sorry, Ed, I was more than long, more than Mediterranean and Latin in my answer. I'm clearly not straight to the point in Anglo-Saxon way, but if you analyze the call, you will find a lot of useful information.

Thank you. Appreciate it, Carla.

Thank you. We will take the next question from Lawrence Watt from Buckley. The line is open now. Please go ahead.

Morning, Luca. Thanks very much for the opportunity to ask questions. A couple from me, please. On your guidance around America, you're talking around no recovery before Q4, 24, 25, which presumably is the quarter we are in. Just on that, have you seen much change in January with regards to being able to hit that recovery in this quarter? But also in context of the comments coming in from LVMH last night, they're not really expecting much of an improvement in the wine and spirits divisions. for the next couple of years, or they're giving it two years to see a recovery. It seems to us that the impact that you're facing is a lot due to the promotional activity coming in from Hennessy and the US in particular. I'm just wondering if you think that recovery could be happening in this quarter, given what they seem to be doing on their pricing. And then secondly, similarly on the promotional environment, are you seeing any change in promotional environment in China, whether that's in from different brands, different companies, or different price points. Are some areas of the cognac business in China being promoted more heavily or less heavily than others? Thank you very much.

Thank you so much for your question. So for the U.S. specifically, for the full year in sales, we are expecting in top line in sales a strong double-digit. so the worst regional performance, showing a slight sequential improvement in H2 versus H1. Q4, sell-in, should be back to growth, driven by very easy comps and dynamics of likelihood periods. In terms of depletion, we should see a continued improvement yearly and to be at best flat in Q4 in volume at least. In terms of run rate, what's happening in January, we are fitting with the hypothesis. So far, we are more or less flattish in volume. But it is only a situation we had some days ago. We see the final channel and clear influence by control states. It will be the same in the quarter. We hope so. It will be enough. To change our guidance, no, because as explained, there are sequential improvement, more in volumes than in value, and some big states underperforming are waiting on the math for the guidance, which is precisely minus 18. So Q4 will be positive in selling and improving sequentially with the aim to be at best a flat in volumes and depletion in Q4 for U.S., I will answer to the third question, if you allow me, the China. So, yes, China, it is also slightly touched by promotional intensity. And when there is no promotional intensity, I'm talking global, not talking about us, because, you know, the more pricing, power, control, I think that I don't want to bench ourselves with our peers. but we are quite proud of what we are doing on that point. There is promotional intensity, and there's also, I will be back on that, also maybe sometimes for some of our peers, a bit overstocked on the field. So the promotional intensity is there, and considering, let's just imagine that MOFCOM additional duties will be eventually confirmed the latest the 5th of July now the new deadline the 5th of April clearly it will drive to increase of prices and clearly if you have a lot of stock for some brands for the cognac it will be a promotional intensity to try to speed up the sell out because we have to get rid of the stock I'm talking category I'm not talking about us our stock are very very healthy So, yes, there is a bit of more promotional intensity. In terms of category, yes, the fact that lighters and spirits are also performing for us means that there will be more diversification. It is something that will be negative in terms of compound algae growth rate, both for demographics on habits of consumption for cognac in the long term. We don't think so. As you know, we totally respect your opinion, but we are not aligned on that on the long term. The promotional intensity could have an impact on value dynamics on the short term, but not in the long run. Now, your second question, which is, link to the LVMH and try to compare what they said to our situation. So, let me answer in a different way. We can say that there is a strong optimism of Mr. Arnault in the U.S. directly, which is good news for us because our strong, very strong exposure bigger than them comparatively. And I hope he's right. So this is in terms of long shot. So this is an important statement. For China, for what we're concerned, which we are performing, I think, not bad, quite better than our peers. We demonstrate great resilience. So without putting any medals on our shirt, but I think that is a comparative difference between our performance and there. In terms of timeframe, two years, three years, I don't know what does it mean, frankly speaking, because we don't need two years to clean our inventors in China, for instance, if we want to put it that way. The fact that we stick to our pricing power and strategy has been and it is painful in the U.S. It's waving on our performance. It's waving on every indicator. It's waving on our market cap, clearly. That makes that digestion is already there. And third point, we don't have management change that allows to give a time frame or some period of adaptation to help wealthy figures improve by themselves. You know, for them, it's only division. It is not listed separately. It is not visible. Okay, you have some indicators. For us, we have only our brands. So everything we are doing with our skies, 1 billion and top line, is very visible. Every single wave is waving. So I don't know what two years means. What I know that two years, considering the actual point of the actual situation, end of December of Rémy Cointreau and Cognac more than that, We cannot afford two years to solve that. We have to move into speed quickly and continue to arm around fundamentals and improve performance. We don't have the chance to have many billions additional and sensory business covering the losses of the one space division.

Understood. Thanks very much for the call.

Thank you. We will take the last question from line Simon Health from City. The line is open now. Please go ahead.

Thanks. Morning, Luca. A couple of things for me. Obviously, you've given a lot of detail, but I'm going to have to go over the transcript to fully understand everything you've said this morning. But just so I... make sure I understand now what's driven you to now guide towards the bottom end of the organic sales growth range. It sounds like perhaps versus your expectation, the indirect channels in China are a little bit worse. We've clearly got Chinese New Year timing affecting Q4, and maybe some of the major open states in the U.S. are underperforming slightly versus your expectations. Is that right? Are they the main things I should take away from your comments? And then secondly, maybe related to those open states comments you made, particularly around New York and Illinois, can you give a little color as to why those states are underperforming so much and what you're perhaps doing there to try to improve performance?

Thank you. Good morning, Simon, and thank you for your question. Illinois is a very important state. It is a fighting state for everybody. For instance, you consider the price of one of our new competitors, So we can name it. In the last five years, it was the lowest one. So it has always been a fighting territory. And it is one of the big states in which price war, price positioning, big volume deals has always weighed on the performance since 50 years. And it is very important. So it is a clear, important state. In this moment, our integrity in terms of pricing power waved a bit on that. And it's also a strong BS state as well, in which category in which we are not playing. So we're not playing with the same cards. It is the way it is. To try to answer to your question, let me give you what we expect for the Q4, okay? At group level. So I think you have some color by region and by digit. We expect the Q4 in terms of sales to be slightly better than Q3. Q3 was minus 21.5. But marginally, not so much in serene. That's the reason why we are guiding more to minus 18. Inside that, U.S., I repeat, in top line, we return to double-digit growth, led by lacrosse and spirits, while at the same time, cognac will be more complicated, probably in top line, will still remain negative. Why? There is a spark in sell-out, depression, more lacrosse and spirits, but it's not to the same extent we expected, so the absolute value of the recovery, the restocking, is delayed. China. which is the most important factor. That's driving the guidance more to the minus 18. China will be in a double-digit decline, the Q4, impacted by mainly three factors. Negative calendar effect, minus five this year, plus eight last year. It's 13 million that are waiting for us. So we have rivers, Q3, Q4, Chinese New Year's effect. ICOMPS. You remember Q4 last year? Massively stocking effect last year in China. That waiver, that not reproducing themselves automatically this year. And more in the indirect channel. And third, indirect channels, softer market condition, a bit of cloudy environment driven by the anti-dumping investigation, so you have this gray cloud that are waving on the atmosphere and catch pressure on the wholesaler. We are not giving additional discount to place additional stock or giving, I don't know, 90, 120, 180 days more. I don't know what the peers are doing, but I know that they are more stock than us. EMEA. EMEA and Q4 should be down, impacted by Cognac. So by division, you understand that the Q4, which will be globally slightly better than Q3, but not so much, will be up strong double-digit in Lagosian spirits, and down strong double-digit in Cognac. So a very diversified footprint. if you want originally to try to summarize that in terms of H2 deviance compared to the previous guidance, if you want, if you want to consider minus 18 compared to minus 15, would we say a killer foot? Who is doing what? 40%, 40 to 50 is China's aftertrends. 30 to 35 is U.S., and the remaining part is the rest of the world. By the vision, it is almost 90% cognac. So combining China, which is a cognac country, and delay in timing of improvement in the U.S. for cognac. Everything is better than before. but not meeting the expectation and on lower comp. So, maths count, figures count, global dollars and volumes at the end are not there. Brilliant. Thank you, Luca.

If there's no further question at this time, I'll hand it back over to your host for closing remarks.

So, no more question, I guess? So one time we'll try to do another exercise. I will ask you a question or two questions. Let's do this game, a new one. I would be interested in doing that. Maybe more face-to-face than on a conference call by phone. So thank you for your attention. Have a beautiful year. So this is the first call of the year, and clearly, Let's keep in touch, and next meeting, official one for everybody, end of April for full year, top line, and even more important, beginning of June, with our CEO, Eric Valla, who commented the result of the year, sell-in, it's even more important, sell-out, guidance for next year, and what's next until 2030. So a very easy finger in the nose meeting. Thank you so much. Have a nice day.