Remy Cointreau Sa Ord

Welcome to the Remy Contreau 2025-2026 Fourth 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 5 on the telephone keypad. Now I will hand the conference over to Luca Murata, Deputy CEO and CFO. Please, sir, go ahead.

Good morning, everyone, and thank you for joining us today. As highlighted in our press release, Q4 sales grew by 8.9% organically speaking, including 4 points of Chinese New Year calendar effects. This performance reflects a strong growth of cognac, plus 15.5%, including 7 points of Chinese New Year calendar effects, positively. mainly driven by China, which benefited from a favorable base of comparison, including the end of the disruption in the Chinese duty-free. As a reminder, it was clearly present the previous year in Q4. And, clearly, another positive element, which is the good resilience during the Chinese New Year. In parallel, America recorded a moderate decline due to high comps in the U.S. and some phasing effects specifically in Canada. Second important point to highlight and to explain this plus 8.9 Q4 performance, stable performance in liposensory division, minus 0.1%, which reflects a solid momentum in the US and China, but more contrasted performance in EMEA on the back of phasing effect. Q4 sales decline increase breaks down as follows. Volume decrease of 2.4% and plus 11.3% of price mix effects. Largely driven by mix on the back of strong auto performance of cognac versus glycosine spirits. This performance brings annual growth to plus 0.2% in line with guidance. and represent plus 1% growth, excluding the duty-free impact in China at yearly level. This was a broad picture. Looking at the overall sales performance by region, America is up by 7.2% on 12-month basis, which includes a slight decrease in sales in Q4, mostly driven by negative phasing effect in Canada and high comps in the U.S., APAC is down 4.3% on a 12-month basis, of which two points of duty-free disruption impact the yearly level. In Q4, APAC generated a very strong growth led by China, despite soft consumer confidence and tightening regulatory environment. Indeed, clearly, we have to acknowledge the region benefited from a low base of comps, and around 12 points of Chinese New Year calendar effect, but at the same time, a very good resilience during Chinese New Year. So it's not only comps of technical effect. That's the message. In parallel, rest of Asia performance was weak, affected by tough market conditions. EMEA was down 3.1% this year and continued to display mixed performance. performance in Q4 as well, as consumers adopted a more cautious approach. One last word, a little bit more transversely, on travel retail, global travel retail across all the regions. The business unit, more than a division, can we call it, was up by low double digits over the year, including a strong double-digit growth in Q4, led by APAC, also considered in the low base of comps, and EMEA. This was sell-in shipment. Now let's talk of value depletion, group level, best approach of sell-out. In the US, value depletion declined by mid-single digit year-on-year over 12 months, of which a decline of mid-single digit in Q4, including a decline of low single digit in volume.

In China,

Value depletion were down low to mid single-digit year-over-year by 12 months, but up low single-digit in volume in every level. Looking inside Q4, value depletion recorded a very strong double-digit growth, helped as well by a positive calendar effect. And in EMEA, value depletion decreased by a mid-single-digit year-over-year and up low single-digit in Q4. Clearly, influenced by the performance of the coin. What we can say in a nutshell? Overall, 12 months group value depletion fell by low single digits year-on-year, slightly underperforming sell-in trends, plus 0.2. But this is not true if you look at the absolute value, because in absolute value, we realized a clear destocking as the generated outflow in depletion was bigger than saline inflows. This is mainly driven at yearly level by the US. I'll be back on that point during the presentation also in Ukraine because it's a very important point. Percentage growth decrease in depletion and in saline are now set on the basis in which depletion in value are bigger than saline. So, it is clearly an health checkpoint that has been ticked. To conclude, on the first slide, we are confirming our full-year COP guidance, and we expect an organic decline between low double-digit and mid-teens, including tariffs. So, after this big entrée, order, turn into page number three, a quick note on the Chinese New Year. very important for us, clearly, which was obviously a key factor in Q4. Marketing environment in China remains highly complex, with continued pressure from hardcore restriction measures and still subdued consumer confidence. Despite this challenging backdrop, the group has delivered its objectives and achieved a slight growth in value depletion, I repeat, a slight growth in value depletion on a comparable basis, i.e., Chinese New Year 26 versus Chinese New Year 25, adjusted for calendar effect. So, we can say that it seems that the Year of the Wolves has brought us a little bit of luck, and that our centaur has been perceived as particularly relevant, even if considering the context, which is not yet totally straight and linear and positive. This performance stands out in the context of the sharply declining market and therefore represents a real achievement. However, we shouldn't declare victory too soon. The market remains challenging and it's a daily battle for our teams and in the near term, the road ahead will still have a few bumps along the way. But at this stage, I would like to thank warmly Chinese teams for their strong execution and the multiplication of impactful retaliation on the ground for a Chinese New Year that was, considering the context, not bad at all. Turning to slide number four, full year sales, so back to arid figures, amounted to 35.3 million euros, representing a year-on-year decrease of €49.3 million or minus 5 on a reported basis. This performance was shaped by the following factors. An organic growth, clearly, of plus €2.1 million, so plus 0.2. This performance is split between plus 3 of positive volume effect and minus 2.8% of price mix. Price mix is negative. mostly impacted by price, while my mix was slightly positive. Second point, as expected, a negative currency translation impact of 51.4 million euro, or minus 5.2% in terms of loss linked to the foreign currencies, mainly driven by the deterioration of US dollar, which accounted for 29.2 million euro, and for 15.2 million euro linked to the Chinese RMB. Now, slide number five, let's delve into organic trends by region. Starting with the Americas, in which organic sales increased by 7.2% this year, down by 18% on a six-year basis. This year-on-year performance includes a mid-to-high single-digit growth in volume and a slight growth in price mix, mostly driven by mix at year 11. In the US, specifically, in South America sales grew by low to mid single digit in Q4, mostly driven by lack of experience despite a high base of comparison. In parallel, on the depletion sell-out side, Q4 depletion continued to improve sequentially in volume year on year. So compared to Q3, for instance, and specifically at minus low single digit, representing a decline of mid-single digit in value. This is encouraging, but clearly not enough, because it is still negative. Overall, full year value depletion stands at minus mid-single digit, significantly less negative than last year, but still negative. In this context, Inventor 11 in the U.S. is slightly improving at remaining in terms of months, but as you know, it's an incomplete compound as a measure, at four months at the end of March. Inside America, there's also Canada, in which sales were down, but very strong double-digit in Q4, impacted by concrete and real phasing effect and the stocking. Conversely, in Latin America, sales were up by low to mid single-digit in Q4, mostly dead by cognac. End of March, America accounted for 39% of group sales, so two points more than the previous year. Second region in terms of weight, we know now APAC, in which organic sales declined by 4.3% year-on-year over the year, but increased by 18s on a six-year basis. So in the short term, America's plus seven, impact minus four. In the longer term, longer view, clearly, down 18s for the America versus 1920, increased by 18s on a six-year basis. Analyzing the volume value equation of the region overall, all brands included, the performance were mostly impacted by negative mixed price, while volumes were stable. Inside China, sales were up by a very strong WG in the last quarter, helped by low comps and a positive Chinese New Year calendar effect, as said, of 12 points at APAC level. What we can say, to give some more colors, that against persistent soft consumer confidence and regulatory consumption restrictions, Chinese New Year depletion proved to be resilient on a comparable basis. Looking at the channels, growth was driven by wholesaler, direct e-commerce and PCDs. In parallel, global value depletion were down low to mid single digit year on year, but up low single digit in volume. This yearly performance includes a very, very strong double-digit growth in the last quarter. Given depletion are more or less in line with selling trends in 12 months, inventory levels in China remained healthy across most of the brands at the end of this fiscal year. Elsewhere in the region, in APAC, rest of Asia recorded decline of mid-teens in Q4. impacted by cognac in a challenging economic environment, alongside intense, fierce promotional activity. By the end of March, APAC accounted for 38% of group sales, down two points compared to the prior year. So, Americas 39% and APAC 38%. Finally, the last region of weight, EMEA, had organic sales down by 3.1% over the year and around minus high single digits over six years, primarily reflecting a negative mix effect. In this big region, we have many sub-clusters. Let's start with the third-party distributor, which sales were slightly down before, mostly impacted negatively by Germany. and more generally, in all the countries represented in the cluster, by weak consumption trends driven by macroeconomics and geopolitical context. In the UK and Nordics, sales were slightly up in the last quarter, mostly driven by Nordics. The UK was impacted by tax rises, a tougher market, and some additional problems. impact on high brands for the promotional intense activity. In Benelux and France, sales were up by low double-digit in Q4, led by cognac, and to a lesser extent, lack of experience, particularly in Netherlands. Last but not least, MI and CIS, sales were down by double-digit in Q4, impacted by high base of comparison in Africa, and to a lesser extent, by the Middle East conflict. For the full year, value depletion were down mid-single digit in EMEA, but up low single digit in Q4. Overall, this slight unbalanced picture determined that inventory slightly increased. End of March, EMEA region account for 23% of the group sales flat versus the previous year. Now let's turn to slide number six, and the analysis by division started with Quinn, which is the cognac. Cognac division posted an organic phase decline of minus 0.5 over the year, so almost flat, driven by 7.8% increase in volume and a negative price mix of 8.3, equally split between mix and price. End of March, cognac accounted for 61% of our sales, down one point compared to the previous year. This was the overall picture, but let's start with the APAC region, the biggest one for the cognac, and specifically with mainland China, in which sales grew by a very strong WGT in the last quarter, helped by low comps, positive Chinese New Year calendar effect, seven points at cognac level specifically. Despite a complex market marked by soft consumer confidence and regulatory consumption restrictions, Chinese New Year depletion showed, I repeat, but it's very important, resilient trends, slightly up versus last year on a comparable basis, benefiting from the continuous success, essentially, mainly of Remy Martin Club. Elsewhere, Macau reported a weak performance, as Wall Street continued to face cash constraints. Hong Kong sales were up strongly, showing slightly improving underlying trends, while Taiwan was slightly up. Overall, in terms of depletion, 12 months of depletion were down by a mid-single-digit year-on-year and slightly up in volume. The performance includes a very strong double-digit growth in Q4. In the rest of Asia, states were down by very strong double digits in Q4, affected by challenging the economic environment and strong promotional pressure. Second region by weight, which is America, and start with North America, so Canada and U.S., in which Cognac states were down by any single digit in Q4, impacted by continued stocking efforts and based on comparison and also the Canada impact. In parallel, depletion remained negative, but showed a sequential improvement in volume, Q4 versus Q3. All along the year, we witnessed that. Mainly driven, and this is very important in terms of ranges, by REMI7038 and XO. Depletion variation on VSOP was also quite a positive one because stable versus the previous quarter, despite a slowdown of the category. So overall, not yet a positive lands, but continued ongoing improvement. Q4 US value depletion were down mid to high single digits, of which down low to mid in volume, so a touch better in volume compared to value, and 12 months value depletion included a minus 3 points, so we can see that a negative price mix year-on-year at the end of March, but on a 6-year price mix remained a positive plus 9 points. In Latin America, sales were up by a very strong double-digit in Q4, driven by Remi VSOP and Remi EXO. Last but not least, EMEA region inside Cognac, sales grew by low single-digit in Q4. Inside that, we can say that UK and Nordics were up by mid-to-high single-digit in Q4, driven once again by RMI-VSOP and RMI-7038, with market share and new listing gains. Europe 3, a party distributor, was up very strong double-digit in Q4, including some positive phasing and calendar effect. MI and CIS down by a strong double-digit, impacted by high comps in Africa, and also a special cognac, Middle East conflict, waved a bit, while Benelux and France were up a very strong double-digit. Lastly, full-year EMEA value depreciation were down mid-twice single-digit versus year, but up very strong double-digit in Q4. So, overall, an acceleration in the Q4 in terms of coin and depreciation. Digging into Lycos and Spirit divisions, line number 7. Lycos and Spirit division reported past 2.8 organic stage growth in the 2025-2026 fiscal year. driven by a solid volume increase of 2.6 and a slightly positive price and mix effect of 0.2, mostly linked to a positive mix. End of March, Lagosian spirits accounted for 37% of sales, increasing 1 point versus previous year. Now let's review the division performance by region, starting with the biggest one, which is America. And in America, let's start with North America, in which sales were up mid-single digit in Q4, driven by Cointreau, Botanist, and Brucladius. Q4 U.S. value depletion specifically for Cointreau and Botanist were up by low single digits. So this is positive. It's not only an improvement, it's positive, which is clearly a good performance given the current market. Additionally, the price mix was down 2 points compared to the previous one for the 20 rolling months ending March, but increased by 15 points, so more than the cognac. on a six-year basis. In Latin America, sales were down for Latin spirits division by low double digits impacted by high basis of comparison. Second region in terms of weight for Latin spirits is EMEA, in which sales were down by mid-to-high single digits in Q4, following a very strong quarter in Q3 due to phasing effect and also promotional activity. Talking about the division again, the flat performance has been driven by this performance of EMEA theory much more than the other two regions. Breaking sales down further inside the EMEA, UK and Nordics were up low to mid single-digit Q4, led by Quantro Brookladian Botanists, reflecting also greater pricing agility and new distribution listings. Europe third-party distribution down, clearly, by mid-teens in Q4. And the two negative countries in terms of performance were Germany and Greece. More lack of promotional space. And last but not least, Benelux and France up mid-single digit. So this quarter, Benelux and France, even if it is not so big at group scale, were highlighting positive performance. were up mid-single digit, while MI and CRS down double digit. This was selling. In parallel, 12 months by depletion were down below to mid-single digit versus last year. So, slight increase in inventory Lycos and Spirits division in Europe. In APAC, Lycos and Spirits division performance was clearly driven by China, in which sales were up by very strong double digit in Q4. driven by Brooklady, number one, and to a lesser extent, Cointreau. Full-year value depletion were down by a single digit, but basis were unbalanced, so depletion already bigger than selling. Remaining part of Asia was up by a low single digit in Q4, supported by Japan, mainly Brooklady and Cointreau, while Australia and New Zealand continued to face tough economic and geopolitical and market conditions. Last but not least, non-group brands represent 2% group sales, were stable in ratio year over year. They record an organic decline of 22%, 22.4%, affected by Benelux and the UK. Almost finished, and then we'll switch to Q&A. Let's now turn to slide number 8 and 25-26, Guidance. Today, we are reconfirming our operating profit guidance. In a nutshell, we expect an organic COP operating profit to decline between low double digits and mid-teens, including tariffs in the US. In addition to this organic performance, there are also currency effects and we reconfirm the previous expectation between 25 and 30 negative million euros in terms of impact. One final word on our transformation journey, René Cointreau for World or RC for World. As mentioned in our last press release, the April 8th, the program is now effectively underway. This plan marks the decisive step forward aimed at regaining momentum in its market and maximize the potential of our brands. Our objective is to clearly decouple ourselves from economic trends and build, realize, and self-help story, given the ongoing volatility in the global economic and geopolitical environment. Through this plan, whose full effect will be delivered over the next three years, our ambition is to generate value in every action, every single action we undertake. It can be in distribution, in the way we invest in ENV, or through greater centralization. Setting clear governance rules also as well between brands, market and corporate function is also a key component of the problem. But we look forward to meeting with you and clearly our CEO, Frank Marie Lee, on June the 4th to share our ambition in terms of value creation of RC4World. Thank you for your attention. Now I am happy to answer to your questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. You are kindly asked to limit yourself to two questions only. The next question comes from Richard Withagan from Kepler Shoebrew. Please go ahead.

Good morning, Luca. Good morning, Celia. Two questions from me, please. First of all, you continue to invest in the U.S. and in China in the past year. Is there any reason to change the investment materially as we enter fiscal 2027? Are there any markets where you intend to increase or decrease your investments? And then the second question is on the announcement from early April, the launch of the transformation plan, you also include some changes in the organizations. the top structure may look a bit complex with a steering committee, some cross-functional roles, etc. So how do you make certain that decision-making remains effective and quick if needed?

Thank you for your question. In terms of speed and shift between AMP or global investors, not only AMP, it can be also CapEx, specific overheads, also in revenue growth management. The whole pack, in terms of region, will be progressively increased in the major pocket of growth. And in China and the U.S., we still have some deep blue ocean to fulfill. and also increasing the support of emerging markets, new ways of building the growth inside new territory. So we need to balance that to fuel a top line, which is a strong part of our future plan, because clearly we need to improve the top line efficiency and productivity to be able to support this increased growth. footprint in AMP. In terms of choices, it might be more clusterized with a clear call in terms of brands than in regions. So we will clearly, even more than in the past, make some prioritization call in terms of brands, not divisions, or entering inside each division, and also ranges So this might be changing and clearly will be discussed and delivered during the Q&A in the future session because it's part of the, not only transformation plan, but also the midterm plan that, as you know, will be also clearly delivered in November. So I will say support new region, increase for some deep blue ocean inside the U.S., In China, travel retail as well, in which we have strong ambition, an emerging market, but more twisted, maybe a more opinionated and clear call than before in terms of brand prioritization. The organizational change as we made is quite the opposite in our opinion. It is the way I was working that are behind allows to have a clear call in terms of accountability, focusing region and brands on their core activities and avoiding to think of sometimes back office of accessory activities that are disturbing the attention on the realization. So, what it seems to your eyes, I get it, in increased complexity, in reality, it is a more clear allocation of where the decisions are taken and the execution and the management or the ownership or the profit and loss, the cash flow, even more importantly before, and balance sheet key elements are designed and where they are realized. So to do that, we need to put them in a clear way. This is our will and our goal.

Thank you, Luca.

The next question comes from Thomas Hulls from Goldman Sachs. Please go ahead.

Good morning, Luca. Thanks for taking my question. Firstly, you highlighted the Middle East impact within EMEA alongside weak consumption trends in specific markets driven by the geopolitical context. Could you provide a bit more color on the size of the impact that you saw throughout the quarter and any of the impacts seen on travel retail? And then secondly, perhaps a question for the full year results in June, but following some of the headlines we've seen related to U.S. tariff rehearsals, how should we think about the impacts going forward to Remy and any retrospective adjustments to prior year impacts in the U.S.? Thank you.

Thank you so much. So, Middle East impact... at the full year basis has been not so important. So I didn't highlight it as a technical factor because we are talking one or two million. So if I want to be trying to get up with the company concerns at all price, I would have highlighted that as a technical factor. So it was not the name of the game. it is marginal. What is more important is the disruption, not in terms of figures, in terms of confidence in all the ecosystem of the European level, not only in the specific region they are affected, because it's part of the wider geopolitical momentum in which the ongoing uncertainty waver on the ability to carry a little bit more stock, even if you have some competitors that are improving. So it's more a disturbing element on the way we are working than in the actual figures. We built the budget just before the war started or the conflict started. We did not adjust that because at group level, so far, touching woods, is not a major in terms of financial impact. It is more disturbing in terms of the way we operate every day and clearly logistic impacts the different routes to market and the way we are refurbishing our key market and key customers. Travel retail, we had a good year. We have a strong ambition. Clearly, conflict, once again, not only in terms of ability to fly, but also in terms of people working, people working. being able to spend based on consumption, which is organically growing, might be impacted in terms of global attitude. So far, once again, our results are not showing that. And touching woods, we have no technical factor to highlight. More global negative cloud in terms of ways of working. Can you repeat me, please, your question on the full-year consensus? I didn't get if it was a specific one in the U.S. or for more what we are thinking in terms of our full-year consensus to 2025 and the operating profit at company level. So, please, precise your question, if you may.

Yeah, no, sorry, so the second question was related to the U.S. tariff reversals headlines that we've seen, so how we should think about that in the context of the group going forward, and then any retrospective adjustments to impact from this year?

Yes, so technically speaking, but I cannot comment specifically on the value because it will part of the result of the presentation of June 4, I will highlight the impact on the specific closing. So far, it is estimated 25 million, 20 and 5, 20 for the U.S. and 5 for China, so for price undertaking. So, what we are expecting in terms of the future, so, are we expecting to be reimbursed? So, The Department of Justice filed a declaration with the Court of International Trade, CIT, on its proposal for custom border protection to implement the refund process, and we followed that. So on April 20, Phase 1 has been followed by our team to begin a call for tariff refund, and as such, as a custom broker filed on our B-Alpha, what will be expected as a refund in the 60 to 90 days. News are evolving clearly every day regarding the U.S. tariffs in terms of application, in terms of the ability to get the money back. As such, more pragmatically, we have not yet included any kind of refund in our budget 26-27, but clearly this is now a serious hypothesis all along the Q1 or maybe Q2. when the refund should happen, because it's 16 to 90 days, so we are talking between end of June and mid-July. When I see the color of money, I will react, in a word. Which tariffs would we expect for 2027, which is not the reimbursement, but what we took into account. Considering, too, the strong volatility of the environment of the rules, also, for U.S. tariffs, we prefer to adopt a very cautious approach when building the 26-27 budget, and we did not change it. As such, we forecasted, we included in our expectation, 15%, 1.5% of tariff from Europe and 10% from UK and Barbados, and we did not include any refund. So, what does it mean? Refund happening could give us additional means to support the top-line journey and the operating profit journey as well, And as well, budget expectation might change according to the change of tariffs. It can be positive if its trend is positive and be negative. I don't master that. I can only be transparent with you and adjust our expectation. We are clearly calling at this stage for a cautious approach because the situation is still very complicated and cloudy. Thank you.

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

Hi, Luca. Hi, Celia. Two questions from my end, please. Looking really for a bit more color on your two key markets, Luca. So the first one in the U.S., slightly better trends on 1748 and XO, but does that imply that actually it's your U.S., African-American consumer that remains the pain point and that's where the weakness is? And the second question then on China, just looking for a little bit more color on that slightly up depletion trend. Is that excluding the reopening of Chinese duty-free so that really the underlying demand you're saying is slightly up?

Thank you. I didn't get the sound on the first one. Can you repeat on the U.S. trends?

Certainly, Luca. The U.S. trends, you know, you say that 1748 and EXO were doing a bit better than the remuneration of the SOP. Does that imply that your pain point, the big area of weakness in the U.S., is your African-American lower-income consumer? Is that the big area of weakness in the U.S. in terms of underlying demand?

Thank you. So, no, I don't think so, because it's more that the SOP stabilized at an increase, Q4 equal to Q3. So, in terms of variation, modification, quarter over quarter, it's more skewed to 7038, that was clearly suffering more than the SOP in the short term. So, we highlighted that for 7038 and XO, because they were suffering more than the SOP in the short term. So, it does not imply a structural change of the consumption base, or the consumer switch eventually. We want to highlight that. So it's more that after I stabilized the SOP with specific AMP and pricing agility program, that even if I moved more slowly than expected, started to pay, I don't say dividends, but to pay back a bit, and we now stabilized. 738 and XO, they were a little bit trailing, running behind, recovered in the quarter, and I hope that we will continue because they are very important as well. The SOP, it is cash cow. The other are the clearly even more interesting in terms of margin. So an acceleration of that can play an additional role in terms of our journey in profitability and in the valorization on depreciation as well. So that is why I like that because it's a positive twisting point. It doesn't mean that WSOP is weak. No, it's stable. Does it mean that we lost a part of the consumption base? If we have lost it, it's already lost in the last two years. We didn't lose it, additionally. China underlying trends now is not only technical. So if you consider overall the fashion of China's New Year, the performance was strongly, strongly positive. But I need to adjust that for calendar effect, a bit of duty-free impact, which is positive, but stripping out all that remains slightly positive. It touched clearly compared to competitors and markets that were negative. So without being too positive, because I know the market is still very complicated, very volatile, very fragile, what do you want? It was not the Chinese euro of the century. but we add and we gain market share. We were able to realize a better performance than the market and our biggest fear. The underlying was more solid. Which kind of channel is very important. Not only this time e-commerce, direct e-commerce, D2C and B2C and PCD, but also Some wholesalers, which is the indirect part, which means slightly touching woods, a regaining of confidence in terms of the intermediary channel, which is always an important small positive sign. In terms of ranges, clearly Club has been the king of Chinese New Year for our performance.

The next question comes from Ashutosh Jain from Barclays. Please go ahead.

Hello. Morning, team. Thank you for taking my question. Just one from me, please. Can you comment on the level of promotional activity you are currently seeing in Cognac, particularly in the U.S. market? And how are you responding to the excess inventory and pricing pressure across the value chain? Specifically, we would be interested in understanding whether introducing lower value or, say, more accessible SKUs in the U.S. is part of the solution. Thank you.

Thank you for your question. So, small formats and convenient offer are part of our... not solution, we say, offer to the market, take into account a lower level of spending revenue by the consumer without changing totally the DNA or spectrum. So it is at this stage a clear switch, but more tactical than a... a definitive ultimate switch. We'd be bigger than before, but we remain in a wait-and-see attitude to see if we have to go further than we realized, or we need to stop that. So it is an adjustment more than a clear inflection. In-term promotional activity is still very strong. Some peers stopped to decrease the official list price, so this is a good point. But promotional activity is still very strong. And can we witness that also with the difference, the difference of performance state by state? The more fierce promotional states witness the highest volatility. Let's take Illinois. Twelve months ago, we realized a big, very big performance of four or five quarters, and then we have a huge up and down like everybody else. When you have big volatility in some key states that are affected by fierce promotional activity, it demonstrates that it continues to be there to impact the performance. And the long term needs to be stabilized to be able to have a price offer which is clearly calling for a consumer habits that are more stable than before. So it has solved the promotional competition environment question, not at all. Are we reacting in which way to that? In the last 12 months, after two years remaining clearly right in our shoes, we decided it was better to try to step out and to work a bit, becoming a little bit more flexible, so we increased a bit the promotional activity. and we also right-size sometimes the price of some key ranges like the SOP at $49.99 in the major part of our key markets. Last but not least, depletion footprint in the U.S. is and will be probably also clearly influenced by the change in route-to-market and distribution footprint that we are witnessing. for us are very important, with some distributor gears that are changing with some switch from R&DC to RAIS, new actors, new ways of working by our peers that will play clearly a role in terms of the ecosystem, in terms of depletion and retail level. The positive point seems to be that the new operators even if they don't have a very strong experience, they have a lot of financial solidity and robustness. They want to win in this race and also we think the global market can profit about these additional weapons put on the field.

Very clear. Thank you so much.

The next question comes from Tilly Eno from Morgan Stanley. Please go ahead. Hi, good morning, Luca.

Thanks for taking my questions. Just one quick follow-up on China. Obviously, a lot of moving parts with the Chinese New Year timing, but that's slightly up year on year. Do you see that as a sort of sustainable, reasonable run rate in China, or was there any sort of concentration of activity around the Chinese New Year period? And then just my second question, given the input cost backdrop, have you seen any impact on your distribution or logistics costs yet, and anything just on how you're thinking about that? Thanks.

Thank you. Can you repeat the second one? Backdrop of what?

Input cost inflation. So just with rising energy costs, if you've seen any early impact on distribution or logistics costs.

So I start with the second one. Input costs are slightly increasing clearly because the effect also in the conflict and the global geopolitical situation. So far it remains at a very reasonable level and manageable inside our building blocks and the compounders that we used to define this fiscal year. That's the reason why I confirm the guidance and they are not calling to change the budget footprint. So quite manageable. Yes, some negative, but manageable. In terms of China, what is underlying, it is something that we can build on quarter to quarter, too early to say. Q1, talking about the short term, clearly is a small quarter, so we might have in China some volatility, positive and negative. Market is still tough, day-to-day battle, so I'm moderately optimistic optimistic, but I cannot grant so far that the positive or underlying challenging performance will be continued all along the year. It will be part of the 4th of June discussion because here is a clear hypothesis on which our guidance 26-27 will be built. We will do whatever we can to realize that another positive year compared to the market condition. Base of comp in Q1 are quite tougher in China, so remember as well. So moderate optimism.

Great. Thank you very much. And can I just squeeze in one more just on EMEA, liquors, and spirits? I think you mentioned inventories are slightly higher. Should we expect that to unwind in Q1?

Yes, a bit. But it's not high. There was a slight increase. But considering that and some specific country situation, computer situation in terms of promotional slot, i.e. Germany, might weigh a bit on the Q1. Yes. The answer is yes.

Okay. Thank you very much.

And we'll take our last question from the line of Jen Cross of BNP Paribas.

Hi, good morning, Luca. Just a couple of questions for me, thank you. The first one is just on the balance of value depletions relative to organic sales that you expect in FY27. So you've explained the dynamic where you obviously had growth in your America's life-for-life sales this year, despite the fact that depletions are negative and inventories have come down, so you've destocked inventories. Do you expect the next year the value of depletions and life-for-life sales will be more aligned? That's the first question. And the second question is just on China, and you've already touched on the fact that the market is still quite soft and you're outperforming quite significantly in Just looking for a little bit more color and if you've seen any change at all in the Chinese market and whether there's been even a modest improvement in consumer confidence.

Thank you. At this stage, we are seeing more, starting with the second one, a Chinese market which is not yet stabilized more than is changing. So, in terms of all the indicators we have, quantitative and qualitative, are not showing this kind of structural movement. It's more that the market is globally more complex, so we need to focus on a daily battle, and I know it's not totally satisfying for you as an answer, because I cannot give you grants, positive or negative, on the visibility in the next four, six, ten quarters. It's more quarter by quarter, momentum by momentum. In terms of value depreciation, let me... Sorry? Sorry? It's great because I hear my voice returning, coming back. I have a echo. Okay. I need two or three minutes because this is a very important point and drives yourselves also to 26, 27 in terms of simulation of consensus without giving any guidance. Okay. Let's start. On a full year basis, depletion variation has been talking about percentage, worse than Selene. Selene plus 0.2, depreciation value negative. But basis, we are non-comparable in absolute value. Consider the strongest stocking over the last two years, and we continue to destock. So if you compare the flows in million euro at the same valorization by skews, so apple to apple, we have destocked more or less 35 to 40 million in the fiscal year 2025-2026. So, the inflow in saline was lower than the outflow, mostly driven by the U.S. This is the early level. Now, in a nutshell, the absolute value of depletion is bigger than the absolute value of shipment. So, that's the reason why, in the future, you don't have to overreact overall if you see a percentage of growth or depletion which is lower than shipment like this year. Because it doesn't mean that there is automatic restocking and vice versa. But what I didn't highlight in the presentation, but it's very important to understand, Q4 dynamics were also giving that. Value depletion up low double digit, higher in percentage, and absolute value density. So it's even more healthier. So in Q4, the stocking was very strong as well, even bigger than the stocking 35 million at yearly level. And this was mostly driven by China, which is an additional positive health check. Why that? Because the overall year was U.S. and the short term was China. So the compounders in the short terms, without giving certainty for the future, are going the right way mathematically speaking. So does it mean that I can give you today a guidance? No. But what we can say is important for you to have confidence some strength discussion the 4th of June and later on. Let's talk consensus that you have on visible alpha today, for instance, for 26, 27. Sales is 4.5, if I'm not mistaken, and operating profit, it is 6.5, 6.8, something like that. It is right, it is wrong. As you have understood, my speech was more focused on the short term to the visibility, This is early stage, too early to discuss about this, because we publish our full year result in June, and we'll discuss analytically with Franck Meiry, all that, all that, take into account quantitatively also the RC transformation journey. But, already, you can consider the global equation is very complex for next year, for everybody, and involves several moving parts, positive and negative. Let's start with the top line. we have some positive expectation in terms of strong will of growth, in terms of sales, depletion, and sell-out. So I don't give you numbers. I give you what we, highlight what we are looking for. At the same time, always in top line, I cannot acknowledge that geopolitical economic context is very uncertain and volatile. So you have strong will, positive economic context, something that I cannot manage 100%, which is negative. So what is the balance between the positive and the negative? This will be condensate, compensated, put together in a recipe and discuss the 4th of June. Same thing, even more complicated for operating profit. Several factors should not be under-evaluated because they can have an impact. Impact is not by definition negative. It can be positive and negative. US tariff. US tariff has two souls. Refunds. to 2026, maybe lower the rate compared to budget, but can be also negatively increased in the rate and no refunds. So, I have to cope with that. So far, cautious approach. And, clearly, even more complex to analyze today, it is the contribution or RC for war transformation plan in year one. As we said, we are looking for a lot of clear goals on the span of three years Year one, it is 25 to 27. So it's a matter also of phasing. And this is something which is quantitatively positive, clearly, in terms of top line and in terms of return operating profit. But also, not in the negative, but in the ways we are operating, learning by doing, coming back to the first question, applying new ways of working between brands, markets, and corporate factions. Because we will learn. and we will act and operate in a different manner. And for a company, when you have these kinds of changes, there is always some time of adaptation. So, I will not tell you if the consensus is right or wrong. I only give you some foot for toes to understand that we have a lot of moving parts on the positive in our commitment and on the negative on the bad side.

Thank you, Luca.

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

No. Thank you so much for your attention. It was a call highlighting that we realize our guidance. Some of you said there was a small miss. I prefer to highlight that there were three quarters that were positive or four in the last fiscal year. So, I'm happy also to celebrate a small, small positive element after three years of negative perception or result, at least in terms of rating profits, because it will be clearly negative this year. To as part of the guidance so let's also what we realized positively not half empty but half full glass we will capitalize on that and it's very important to have our global discussion with Q&A on the magnitude of the ERC transformation plan on the June of 4 and what are the implications in the short terms of for the guidance 26-27 in a complicated and unpredictable world. The UCA continues to be here. So we have to cope with that, all of us. Thank you so much and have a nice day.