Remy Cointreau Sa Ord

Welcome to the Remy Contreau 2025-2026 third quarter sales presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on the telephone keypad. Now I will hand the conference over to Luca Murata, CFO. Please, sir, go ahead.

Good morning, everyone. Thank you for joining us today. As highlighted in our press release, Q3 sales grew by 2.8 organically, and this result stems from mixed regional trends, mainly driven by, on one end, solid growth in the U.S. for a fourth consecutive quarter, supported by clearly low comps, and improved sequential depressions. They are slightly improving compared to Q2, but less than expected, and they are still negative, talking about the depression in the U.S. In addition, EMEA is back to growth in Q3, driven by both divisions, cognac and liposome spirits. And last but not least, on the other hand, China is relatively resilient, considering the continued challenging markets and excluding an unfavorable calendar effect due to the shift of Chinese New Year's timing, which count for three points in Q3 at group level, i.e. one point if you consider the year-to-date nine-month basis. Let me put everything differently. We would have been flattish over nine months, excluding those technical effects. Q3 sales decline breaks down as follows. A volume increase of 8.7 and 5.9 in price mix effect. Clearly, Q3 sales increase. Largely driven by cognac, mostly in India and China, which is impacted by the performance of the end brands. Looking at the overall sales performance by region, America was up by high single digit over nine months, of which a low to mid single digit growth in the Q3. APAC sales decreased by low double digit over nine months, of which a decrease of low single digit in Q3. This performance is up mid single digit, excluding the negative calendar, changes in the calendar effect, which is eight points, if you consider that at APAC level. In-year decline by no single digit over nine months, but with an increase of high single digits in the last quarter. This was the overall sales performance by region of nine months with a specific touch on the last quarter. Let's do the same thing at least at nine months value depletions at group level. In the U.S., value depletion declined by mid-single digit year-on-year over nine months, including a decline of low to mid single digit in Q3. In China, value depletion were down 18 over nine months year-on-year, including the negative calendar effect in Q3 that waves also in depletion screen. And in EMEA, value depletion decreased by mid single digit year-on-year. So what we can say overall after nine months? As a picture, nine months group value depletion fell by mid to high single digit, more or less minus 7, minus 8, and the performing sell-in trends minus 1.9. Why that? Essentially because of the U.S. restocking from the low basis without increasing the level of stock in absolute value. However, the gap has widened compared to the H1 beyond the U.S. and the calendar effect in China. Global depletion in Q3 were still lacking a bit of momentum. I'll be back also with some absolute value during Q&A session, I'm sure. To conclude on this first slide, we are confirming our full-year organic guidance. We expect the organic full-year sales to be between stable and up low single digits, while we expect organic full-year operating profit to decline between low double and mid-teens. The latter, of course, includes the estimated impact from tariffs in the U.S. and price undertakings in China. So, in a nutshell, no changes in guidance compared three months ago. Now, let's turn to slide number three, in which we can witness nine-month sales that amounted to 735.4 million euro. representing a year-on-year decrease of €52.3 million or 6.6% on a reported basis. This performance was shaped by the following factors. First, an organic decline of €15.3 million, as said, minus 1.9%. This performance is split between 4.5% of positive volume effect and minus 6.4 of price mix. Price mix effect, the combination, is in negative and has been impacted by both price and mix in the same proportion. Second, a negative currency translation impact of 37 million euro, or 4.7% loss, mainly driven by the deterioration, conversionally speaking, of the U.S. dollar, accounted for around 20 million less than top line, and the Chinese R&D for 11.8. Now, let's turn to slide number four to delve into organic trends by region at group level. Let's start with the Americas, in which organic sales increased by a single digit over nine months. the IE down more or less low-to-mid things on a six-year basis. Year-on-year performance includes a low double-digit growth in volume, a low single-digit negative price mix impact, mainly driven by pricing adjustment. In the U.S., specifically inside America, sales grew by low single-digit in the last quarter, driven by both divisions, on the back of low base of comparison clearly, but another slight sequential improvement in value depletion, which is a positive news. That is not as much as we expected. Improving nonetheless, but less than expected. So what does it mean? Down by mid-single digits year-on-year in nine months, or which down low to mid in Q3. In this context, what happened to Inventor 11 in the U.S. in months of coverage, more or less remains around two, four months at the end of Q3. In Canada, sales were up, mid to high single digit in Q3, underpinned by both divisions. Very balanced picture there as well. And Latam, sales were also up a very strong double digit in Q3, and there mostly led by Cognac. End of December, America has accounted for 39% of group sales, up four points compared to the previous year. Now, turning to APAC. Organic sales declined by no double-digit year-on-year over nine months, but increased compared to 1920 to meet twice single-digit. Looking at the volume value equation, the performance was impacted by low to mid-single-digit volume decline, while the value part was negative at more than mid-single digits. Why that? It was driven by the underperformance of high-end brands and ranges and increased promotional activity. In China, sales were down approximately more or less low double digits in the last quarter, impacted by the market condition, which remains very challenging, and the strong, I repeat, it's very important, negative Chinese real calendar effect. At APAC level, eight points, I repeat, three points on the Q3 at group level. However, the overall performance is almost flat, excluding this technical effect, benefiting from the return to normal trading condition in travel retail and a very solid Double 11 Festival. Specifically, this event was more or less plus 15 compared to the previous year. This was selling. Talking about global value depreciation, they were down high teams year-on-year. Given that depreciation saw roughly in line with selling trends in nine months, inventory levels remained healthy at the end of December. Elsewhere in the IPAC region, rest of Asia, showed a strong improvement compared to the Q2, posting a very strong double-digit sales growth in the last quarter, mostly led by Cognac, Remy Martin, and Louis 13. End of December, APAC region accounted for 37% of group sales, down 5 points compared to the prior year. And then, EMEA region, in which organic sales were down low single digits over 9 months, and around high single digits compared six years ago, primarily reflecting a negative value effect. Inside this region, talking about the subregion, third-party distributors cluster recorded in mid-single-digit states increased in the last quarter, driven by Germany, Greece, and Romania. Most of the growth came from Cointreau and Metaxa. UK and Nordics, sales were down by a single digit in the last quarter, with sell-in below sell-out trends due to the high data comparison in sell-in, and sell-out was positive in a declining market. Benelux and France, sales were up by a low single digit in the last quarter, essentially led by France, and in both divisions, Cognac and Lacrosse Spirits. And last but not least, MI and CAS sales were up by very strong double digits, boosted by the successful launch of EMEA DS in South Africa and Nigeria, which goes well for next year. This was Celine talking about value depletion. They declined by a mid-single-digit year-on-year in nine months. So overall, with this likely disconnection in EMEA in the last quarter, and inventory there slightly increased. End of December, the Indian region accounted for 24% of group sales, up one point compared to the previous year. Now, let's turn to slide number five, and the analysis by division, and let's start with the queen of the division, which is Cognac. Cognac division posted an organic sales decline of 4.3 over nine months, driven nine months by a 5.4% increase in volume in the negative price mix of around 10 points, 9.7. End of December, Cognac accounted for 61% of our sales, down two points compared to the previous year. What happened there? Let's start with the biggest region inside Cognac, which is APAC. And inside APAC, mainland China, in which sales declined by low double digits in the last quarter, affected by the continued complex market condition and, as said, the Chinese New Year calendar effect. Excluding this technical effect, China would have been almost stable, helped by strong performance during the 11-11, 11-11 festival, e-commerce, and return to normal trading condition in trade and retail. In this very tough context, and given whether CBA were ahead of Chinese New Year, all channels were down compared to the previous year. As they were, Taiwan reported a weak performance, salient depletion. Hong Kong and Macau were up strongly, but helped by positive phasing and some promotion. Overall, nine months of value depletion were down by 18th year on year. In the rest of Asia, sales were up by very strong WGNQ3, mostly led by Remy DSOP and WITRT. Americas. In North America, so U.S. and Canada, cognac sales were up by low single-digit in Q3, underpinned by low beta comparison and slight sequential improvement and depletion. Talking specifically of the last quarter, Q3 U.S. value depletion, they were down to a high single-digit area on cognac. Twelve months value-depletion included less three-point and negative price-mix effect on depletion of three points year-on-year at the end of December, but on a six-year basis, price-mix on value-depletion remains up double-digit, plus ten points. In Latin America, sales were up by triple-digit in Q3, driven by BSOP and Reuters team. In EMEA, cognac sales grew by eight-teens in Q3. UK and Norway were down double digit, however, in sell-in, impacted, as said, by high days of comparison, while sell-out was back to positive, supported by a more targeted pricing approach, new listing, and, I remember, in a very negative market. Europe's third-party distributor was flat on Q3, strong improvement versus Q2, as the more flexible pricing approach leading to market share gains. And MI and CIS were clearly up by triple digits, leading the EMEA and CONIAC progression in the quarter, led by South Africa on the back, on the heels of the RME-Martin-VS recent launch. Finally, Benelux and Trans were up by mid-to-high single digits. Lastly, nine-month EMEA redepression were down low double-digit year-on-year. Now, let's turn to slide number six and the same analysis for the other division, Lycos and Spirits. Lycos and Spirits division reported a plus 3.7 organic sales growth in nine months, driven by solid volume increase of plus 5.7 and a negative price mix effect of 2.1. End of December, the division, the Lycos and Spirits accounted for 37% of sales of two points versus the previous year. Now, let's review the division performance by region. Let's start with the Americas, in which North America sales were up by low to mid-single-digit in the quarter, driven by Cointreau, Botanist, which both delivered positive depletion in Q3, as well, in a decline in markets. Specifically, Cointreau and the Botanist Q3 U.S. value depletion were respectively up by low single-digit, and low double year-on-year. Additionally, price mix was down only two points compared to last year for the 12-month rolling basis period ending December that increased by 16 points on a six-year basis. So valorization compared to six years ago in both saline and even more in biodepletion is bigger, is higher, like with the spirits, compared to cognac. Latin America, who says we are down by low single-digit, in sales in Q3 impacted by price increase in Puerto Rico on Cointreau and following tariffs and fake also alcohol issues in Brazil in Sao Paulo. Minha, second region by importance for this division, sales were up by mid-twice single-digit in the last quarter. Breaking sales down further, UK was up there by low single-digit in Q3. led by Cointreau, Port Charlotte, Octomore, and Telmo. The quarter benefited from the positive effect linked to the distribution gains. This is particularly the case for the botanists. From new innovation launches, Cointreau, FTDs, and the greater pricing agility. Overall, the U.K. is gaining market share alongside positive sellout in a declining market. Europe three third-party distributors says we are up there by mid-wide single digits in the quarter, led by Germany and Greece. As said, overall, we recorded a solid growth from Metaxa and Cointreau. And finally, Benelux and France were up by mid-single digits in Q3, while MANCS was down mid-single digits. This was Celine. In parallel, nine months of adaptation were down by low single digits year-on-year. And then, inside this video, we have APAC. in which, in China, sales were down by a single digit in Q3, mostly impacted by Cointreau, which faced an aggressive price environment and competition, and in parallel, nine months' value depletion were down by low double digits. The rest of Asia was down by low double digits in Q3, impacted clearly by Australia due to phasing and very high comps. We are missing a part of the turnover here, which is the non-group rent, which represents 2% of group sales, and they were stable year-on-year. In terms of weight, they recorded an organic decline of 1.9% in nine months, affected clearly by the performance of the most exposed country, which are Benelux and UK. Approaching to the end of the prepared presentation, before switching to the interesting Q&A session, Let's now turn to slide number seven, talking about these yearly 25-26 guidance. We are today confirming our expectation, both for sales and for operating profit. In more detail, we expect organic sales growth to land between flat and low single-digit increase. At the same time, we expect an organic operating profit decline between low double and mid-teens. So nothing changed compared to three months ago. These guidance clearly include the net impact of tariffs, which is estimated this time of the year at around 25 million net, of which 5 million in China and 20 in the U.S. In addition to this organic performance, there are also currency effects, which remains very negative and highly volatile. While our hedging policy helps to mitigate part of the adverse impact, the recent evolution, ongoing evolution of the dollar and B leads us to expect on sales between 50 and 60 million reduction of the turnover and publisher rates of which 60% will occur in the H2 and operating profits It is a bit reversed in terms of phasing between 25 and 30 million negative factor of which one-third should occur in DH2. Exchange rate volatility is likely to persist throughout the year, which is why I will continue to keep you updated on a quarterly basis. But please highlight the fact that so far it has not changed compared to three months ago as well. One final word on our transformation journey. As mentioned in the press release, the program is now effectively underway, starting with a very granular diagnostic phase across the main value creation levels. So what we are talking about, route to market, number one, revenue growth management, number two, A&P and procurement, three and four, as well, more generic, broader review of our cost base and operating model in line what we share with frank marie at the end of the h1 during end of november presentation by the end of april next conference call on q4 we expect to be in a position to communicate the key strategic priorities that will start to be implemented in the fiscal year 26 27. Thank you for your attention, and I'm happy to answer to your question. Give me two seconds to drink a bit of water. Thank you.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. You are kindly asked to limit yourself to two questions only. The next question comes from Lawrence Wyatt from Barclays. Please go ahead.

Morning, Luca. Thanks very much for the questions. A couple from me, then, please. Firstly, in the U.S., we've seen reports of some substantial improvements in some of the depletion data. I appreciate it's a short time period when we look at the weekly and the often data, but, of course, do you think we should be taking this seriously, or do you think there's some sort of timing effect that perhaps means that these improvements are perhaps erroneous and due to other effects? And then, secondly, you may have seen today – There's some reports of a very strong sell-in into the Chinese New Year period in China. Do you think those reports are real? Are you seeing similar effects on your brands going into the Chinese New Year for 2026? Thank you very much. Thank you so much.

So let's start with the U.S. As I said, we are both at the same time positive and a bit less positive news. When I'm saying that, we are continuing improving that, and we think that we'll continue to improve, to your question. So, yes, we are on the right track. The speed, the magnitude of the improvement is a little bit a deception compared to our expectation. Why that? That we are slipping and we are not so good? Market is really declining in a bigger way compared to our expectation. So even if our performance are not excellent compared to last year, not positive, and a bit of deception compared to our expectation, the market declined as well. So in this specific moment, we are performing better globally than competition, which is something which is very important to highlight. So it is not what we expected totally, so a bit disappointing. of deception, disappointment, but considering the global environment, we're doing a hell of a job on the field. So kudos to our teams. Chinese New Year dynamics. It is globally, this morning, global good touch. We have just started. So we are relatively optimistic. It is not so far what seems to be the Chinese New Year campaign of the century. So we have been in a better position before. We are in wait and see with an open attitude by ourselves as well, like the market. So far, so good. Coming weeks and days are very important. We are not excessively optimistic, but we are not negative as well. So quite a balanced attitude still at the beginning of the Chinese New Year. And also to manage expectations, it will not be the Chinese New Year of the century, but relatively optimistic.

Thanks. Just on the first question, I was specifically referring to the data we've seen in January in the U.S., some of the extreme improvements in the U.S. Nielsen data. It sounds like you don't think that that is a significant improvement.

Yes, it's very complicated to comment on that because the first – but don't remember there is also a lot of – whether bad condition right now that could impact the second part of the month. So right now, also the depletion on an effective way because there are some problems in many states with the snowstorm. And technically, the depletion can be affected by that. It is true that what's happening is helping declining the stock at the retail point of sales. Once again, moderate optimism, we are doing a touch better of the competition, still negative. So for us, it's very important, like for everybody, for us even more, because it's tough to have a negative depression figure since a lot of months. It is very important, also in terms of symbolism, to switch to positive land. So relative optimism and cautious and an overall touch of modest optimism overall for the China and the U.S. That's also the reason why, despite the mathematical negative forks between Syrians allowed to be free, we are confident so far at this stage clearly to confirm the guidance, because even if there is this fork, then we're back on this point because we have to look at an absolute value, not only as a percentage. it is clearly not affecting our guidance at this stage.

Thank you very much.

The next question comes from Edward Mundy from Jefferies. Please go ahead.

Luca, morning. Two questions, please. The first is your comments on doing a touch better than competition within China. I think you've historically said in these conference calls that your mix, i.e. bigger in club and smaller in XR, your route to market, i.e. That big direct-to-consumer business and your channel exposure, i.e. probably smaller in the traditional on-trade, has allowed you to outperform competition. Can you perhaps talk about some of those drivers? And if the market starts to improve, should you be one of the first companies to see that improvement? That's my first question. And then the second is on currency. Clearly, you're keeping your guidance unchanged for fiscal 26, but there have been some recent strengthening of the euro versus both dollar and Chinese yuan. I know it's probably a little bit too early to start giving guidance to fiscal 27, but based on what you're seeing on stock prices and what you know about your hedge rates, is it a roughly similar outlook from a percentage standpoint to fiscal 27 relative to fiscal 26?

Thank you. So as said, as you understood, Chinese New Year just started. We are in a very cautious position, but I repeat, it will not be the Chinese New Year of the century, but there's no need at this stage to be negative as well because some good dynamics are installed. So relative optimism and a clear reactivity on all channels. In terms of channel exposure, I repeat, even if all channels in Q3 were negative in China, including the e-commerce, so we cannot deny that the global confidence of all channels is reduced compared to one year ago. Globally, we are in a position which with the a wave with a lift of the global situation, we can profit that essentially with e-commerce. The fact that users highlight we are less focused on trade, and today we are between 5% and 10% on trade compared to the other. The fact that we are more direct than others, one third of our top line is direct to client, which is no undirected or direct channel framework involved, makes that we should be in position to profit. But as well, we need to look at another element compounded, which will be very important for all our region, for the company as well, which is the need also to improve the free cash flow conversion as well. So there is a point that today is early to talk about that. is clearly a triggering point to be analyzed during June year, full year presentation, and where, with Frank, we will detail the guideline for the year 26-27. So there is some opportunity to grow, and that needs to be profitable, but even more important, and a faster cash conversion growth compared to the previous edits. In terms of currency, there, as you may understand, it is really, really, really crystal gold because it is very, very early to talk about Forex impact for the next fiscal year. So, I understand your point. Let me share you Where do we stand for next year in terms of coverage? So far, for the 26-27 estimated net currency needs in terms of U.S. dollar and pegged currency, we are more or less covered between 65 and 70%. at more or less 1.16 with 60% of options. So very, a bit costly, but very flexible. This year we'll be landing between 1.12 and 1.13. So there is a negative edging impact. I'm not talking about conversion because this is also influenced by a lot of macroeconomic In geopolitical element that I do not master, I watch and adjust. I cannot do more than that. For Chinese New Year, which is increasing the weight, so the weight historically was far bigger. Now it's 50% of our needs of net currency, U.S. dollar, and 34 is Chinese 1 RMB. So the Chinese 1 is very important, much more important than the past. we are 60% more or less edged at 8.4 with 70% option. This year, the edged average weighted rate will be between 8, 8, 10. So once again, in both of them, we need to understand that without being precise in terms of the absolute value, the edged granted coverage rate for 26, 27 will be giving less euro than this year. So let me be clear on that. How much? I don't know. Which is important also to be taken into account for our EBITDA, including the Forex, clearly cannot drive the management of the company. We are organically driven, but need to be considered for the free cash flow conversion rate, which I repeat, will be more important, is already the case, but even more important than in the previous past as an element to manage the company and the compounders. Okay, thanks. I hope it was clear.

The next question comes from Chris Pitcher from Rothschild and Co. Redburn. Please go ahead.

Thanks. Good morning, Luca. Two questions, please. So on your U.S. price mix, you've clearly gone through a big adjustment from where you were sort of during the pandemic to I think your 10 percentage points still above. I mean, Frank was quite clear on the previous question. call that you were going to be less dogmatic about price. Are you at the level where you're comfortable now, the relative pricing, or do you still see further weakening in price mix, particularly as you're seeing the outperformance from Louis Trez? And then secondly, I'm just intrigued by your comment, your specific reference that you're using an external consultant or support from an external consultant in your your diagnostic, can you sort of explain what it was that you think maybe was lacking that you needed a sort of external set of eyes to try and work out the strategy because it sounds expensive.

Thank you so much. So let's start with the business question and then let's talk about transformation which is business as well. Price mix is negative, it's visible, three points. Declining a bit compared to the previous year-to-date. What this reflects right now, let's explain, and then we'll talk about the future. Price adjustment to $49.99 on the SOP on most states. Price adjustment XO also, because NSE XO also, and price architecture fell down a lot. We are not a leader on XO. Clearly, we need to be a follower, reminding that gross margin, even if we don't disclose the figure, the gross margin XO for everybody in the industry is clearly a very strong element. It is every time you are able to increase one case of XO, you increase XO. clearly the accreted impact in cash and profit and loss profile big time. High end segment under performance on 12 months compared to the mix. The revitalization of the SOP, the resilience of 738 squeezed a bit, not as an effect, the weighted average. Negative format sometimes also on Louis XIII because limited edition such as rare casks last year are not replicated. When you have this kind of limited edition, it can play a role. Talking about Cognac specifically, the price reposition already. And on top, as a company, you have clearly the overperformance of Lycos spirits compared to Cognac. What will happen next year? Are we improving the price mix? It's too early to answer in a very precise way, but we need to understand that the gross margin target group level, and clearly also in the U.S., as an important element target remains. that the fact that we need to improve every year in gross margin, it is not the way the world today is composed. So we cannot grant that we are able to have the same pricing power of two, three, five years ago. On that, I'm back to the freakish flow. we need to be a bit more commercial and need to move volumes a bit faster to improve globally the turnover and the free cash flow conversion. I'm not saying that in the future the profit will fall. I'm not saying that. But free cash flow conversion and profitable but also liquid growth, it's more a priority now than the past and the global environment is less keen to absorb price increase or if you do that we will eventually add an impact in volumes in declining complicated markets so uh in a nutshell you cannot modelize big price increase overall in the in future and more playing on the to improve the gross margin to adjust it or to limit the fall in a mix game channel territory and new format new products eventually improving the speed of the innovation is it unrealistic to consider you might come back into vs Never say never to nothing, to or to anything, but so far, no way on the U.S., no way. Why? I read some of your prenotes today. Let me, I will not drop the name, but when talking about will not recognize himself, we cannot consider that V.S. is a technical positive effect in this moment in here, because every time you do that, you have some dynamism, and you also cannibalization, and you have to count about that. So, doing that, as a name in the U.S., I don't think will happen. But we have witnessed the presentation of Frank Marie end of November. I'm not talking about VS, but it was a placeholder for a launch of eventually new products, clearly for the American market, which a different approach. So I'm not talking about VS, but I repeat, a more spread, tackling the new segment of market, higher and lower, of the old brands, including Cognac. In the future, I think the name and the codes of the competition face-to-face will change, and everybody will try to get rid of it, launching new concepts, new products that are able to install new price positioning inside the global category, being more interesting, sometimes wild in terms of competition. The word of franchise fighting each other with the same name, I think could be bypassed. One second that I drink a bit of water.

The next question comes from Trevor Sterling from Bernstein. Please go ahead.

No, sorry, I need to answer the other question of this, of the consultant as well. I answer only to the question number one. So the second question, so why going externally? They have a lot of benchmark to leverage quicker. we need to install a mentality of change. And adding this kind of example benchmark will be very concrete to show what we can do better without denying the values and the things we are doing correctly right now. At the same time, we need teams to be focused on a daily operation because we are not running at plus 10 without any problem. So what are the points to lose one or two points commercially? So we have to have teams that are there that teach on the field to try to grab any single bottle. Doing that with the help of the external qualified organization will also limit the focus on these specific projects inside the company. There is, they know all players, so there is, as you highlighted, we are doing that quite widely, talking about top line, AMP, and also operational footprint. So it is 360 degrees, more or less. There is a strong mutation for the wave of consumption all around the world. We need to touch point in different ways. So if you don't do that with a specialist, AMP ratio, which is already at 20% for us, risk to increase without having the payout to be measurable. Needs professional to be able to increase the touch point at the same time, deliver efficiency, and maybe stop doing some other touch point. So we need clearly this help to open our eyes with an additional qualified specialist opinion that will help us decide and then we will decide we are quite opinionated we will not buy everything we are quite respectful of the history and the tradition you know that is a very strong asset of the group that sometimes can be also considered element that means that we are maybe sometimes a bit less fast than others but we are more consistent maybe and that's the reason why on top The clear triggering point is to improve top line and turn around of the company, increasing the capacity to win, to gain market share, volume and value on the market, improve the free conversion, free cash flow conversion, without forgetting that even if we are still a bit, We have a strong weight of costs compared to our size today. Don't remember, we already cut $230 million, more or less 12% of our overhead and 9% of the council. We can do it on a base which already without any specific global restructuring plan on a day-by-day improvement and without... any bigger plan already reset a bit the base. It is enough? No. We need to go further. But these are the main reason why we needed to do with an external help and more than that, an external eye to be able to watch what's happening for us a bit more than the past.

Thank you. Trevor Sterling from Burstyn. Your line is open. Please go ahead.

Morning, Luca. Morning, Celia. Two questions from my end, Luca. So first one, returning to China, you mentioned that excluding the Chinese New Year effect, you thought China was flattish, but presumably that means you've got that easy comp and travel retail, so the other channels, ex-travel retail, are still negative or presumably mildly negative on an underlying basis. I'm just for the check if that was the right way to understand it. And the second thing was intrigued, Luca, in your presentation. I think three times you referenced strength, you know, in Asia X China, in the U.S., in LATAM. Is this just easy comps, or is there something more in terms of the underlying improvement for ?

Thank you for the question. Yes, GTR gave some room to, so out of GTR, we are not at the same level of performance, but only for the Q3. If you consider GTR for the nine months compared to this year, and we have the most important operators are still in double digits negative compared to the previous year. So I expect this to continue. And technically speaking, the same comment for the VS. For me, they are not technical. In fact, this one is more than a catch-up or the normal way of acting. So yes to your question, but still an answer. It is not accurate. The GTR reopening is still a big negative, big, big negative. So it should be better. Louis XIII, a bit of a momentum and highlighting that we are there. So Louis XIII, it is clearly not the same, without giving any figures, in the same shape and weight than five, six, seven years ago, but our teams continue to fight and to be able, when we can, to grab a specific market share, even if the global worldwide environment is less keen to to this kind of I-style product. There is a specific market. It is not only a matter of pricing, but there is a bit of momentum that we count to improve, to have an additional positive impact, clearly in terms of image and DNA, but even more in terms of our compounders, our financials.

Thank you, Lucas.

The next question comes from Pierre Tegner from Otto. VHS, please go ahead.

Please unmute your microphone and go ahead.

I look at Pierre Tegnard speaking. Thank you for taking my question. I would like to come back on your previous very interesting comments on adapting the asset rotation equation of the economic model. My question is how we have to think about the future in terms of better balance between the P&L and the balance sheet. What I mean is Are we to think about more asset rotation at the same level of operating margin, or is there much more a kind of trade-off, if I may, in terms of margin and asset rotation?

Thank you for your question. It's very interesting. please forgive me because I cannot be totally precise because as you know, Frank said it very clearly, guidance for next year will be in June, and the whole plan for the future five years will be disclosed later in this calendar year 2026. But generally speaking, clearly, We need to think of future of the company. We will be a bit less sentimental in terms of brand, asset, everything. So DNA is the same, but cold, pragmatic, real compounders, figures will be even more on the table to be discussed. Then decision will be At the end, the collective Board of Directors vision, frank direction, but the financial point of view will be increasingly important. And on this point, thank you for your question. You have to put a scale awaiting the three big elements we have, financially speaking, which is balance sheet, free cash flow, and P&L. All trees are very important. There will be even more skewed towards free cash flow generation, free conversion, progressive balance sheet, solid, robust dynamics, increasing the age and balancing long-term asset and liabilities with a bit more flexibility inside asset priority rotation, and as a consequence, the profit and loss still remain very important because the BDA is an important compound of the ratio theory, so we forget that. But more in absolute value than in profit and loss model in percentage base. Absolute value, absolute cash, absolute BDA are more important than the percentage of operating profit compared to the top line. I cannot be more precise than that, sorry. Very, very useful. Thank you, Luca.

I will take a last question. The next question comes from Tilly Eno from Morgan Stanley. Please go ahead. Hi, good morning, Luca.

Thanks for taking my questions. Besides just on the US, I mean, while your depletions and sell-out trends are declining at a similar rate in Q3 as in Q2, the overall spirits market saw quite a sharp deterioration over calendar Q4. Could you just talk a bit about what you're seeing at the wholesaler distributor level in terms of behaviours and if there's any kind of indirect impact from potential inventory pressures on your plans? And then my second question is on China. You've spoken previously about some heightened promo activity. Just wondering, are those pressures largely within the cognac category or are you also seeing a bit of price competition from other international spirits categories like, say, the sort of lower priced whisky? Thanks very much. Sorry, I didn't get the second one clearly because... And so just the second question on China where you've previously mentioned some sort of mixed impact from promo activity. Is that largely concentrated within the overall coin market or other subcash groups? Thanks.

So talking about US depletion in terms of flexibility, We'll try to speed up that, switching progressively also the AMP mix, more the fast-moving cognac lines. And for the Lacrosse and Spirits, we did already part of this job and is witnessed by the performance. In terms of distribution, clearly, situation is not totally sit on a very easy way because everybody knows some of the different situations that are happening right now inside the wholesale footprint. But all in all, to improve the depletion US speed, we are switching part of the, as I said, AMP, more on BTL, so less brand hours in the long term and more in the short term. For the China promotional activity, It is a bit spread. It's not only inside our category, but our category even more. And on that, we are increasing as well, but far less than our competitors, also because, as was highlighted before, we have one weakness that becomes a strength when it comes to proportion activity, which is our exposure to the on-trade, back to 10%. which is low in terms of brand, algorithm, and so on, but protect us a bit in terms of promotional depth. In that case, we have many types of forms of promotional support that can be given, not only money, but also tasting bottles and so on, banqueting and so on. We increase our promotional footprint far less than the competition. It's more general, not only specific for our for our category.

Thank you very much.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you so much for your time today. I would like also to end with the last point. The question was not asked, but it's very important. If you look at the Q3 between sell-in and sell-out dynamics, it seems that sell-in is positive, plus 2.8, and depletion negative. So the normal brain reaction is that, ah, you are stalking. Ah, the answer is many languages, no, not yet. Nine. No. Because if you consider the absolute value of the depletion is more than 20 million euro comparable basis compared to the sell-in. So what we have done all together in the three, four, five, six quarters to rebalance sell-in and sell-out has helped us to land in a very balanced Stock equation in absolute value. Clearly, we have the exception state by state. But overall, even if the compound is in percentage level, we'll show, we'll tell another story. It's not the case. It's not the case. Q3 was the stocking even if saline was increasing and sellout was decreasing as a percentage because the base of sellout was, and it is, bigger than base of saline. Thank you so much. Talk again at the end of April and stay tuned. Ciao, ciao.