Remy Cointreau Unsp/Adr

Good day and welcome to the Rémi Cointreau first half results 2020 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Marc-Éric Dubré. Please go ahead, sir.

Thank you. Good morning to all of you. So, once again, we are presenting to you the interim result of Rémi Cointreau. This time from the 1st of April 2019 to the 30th of September 2019. You know already the turnover as Luca Amarota announced them to you on the 18th of October. So as a reminder, our sales were stable for the first six months. on a reported basis and a bit down on an organic basis by 3.6 percent. But much more importantly, our group sales were – group brand sales were up 5.5 percent on a reported basis and 0.8 percent on an organic basis. And more importantly, both divisions, cognac and liquor and spirits, were up for that time. So what about the current operating profit? The current operating profit for the last six months was stable on a reported basis and down on an organic basis by 4.7%, as this, of course, is going to be very much explained in detail for you soon. The important figure I think to see is what happened for group grants. And you can see that for group grants, we were up 5.5% on the reported basis and 0.8% on an organic basis. So more or less in line with the evolution of the turnover. Why was it so? Of course, we were able during the period to increase significantly our gross margin, both in value and in percentage. As we are pursuing our value strategy with success, but confident in that strategy and that approach, we also decided to increase again significantly our advertising and promotion expenditures, so which gives for group brands this increase of 5.5% on a reported basis for the operating profit and 0.8% on an organic basis, which is more or less in line with the evolution of turnover. On our current operating margin, we were up 0.2% reported basis, minus 0.3% on an organic basis, We would like to remind you that 26.4% is a figure much higher that we were achieving not long ago. For the group net profit, we are top of the class with above 90 million, plus 3.5% on reported basis, plus 8% on organic basis, So our earnings per share is this time above 180 per share, again up 4.5% on reported basis and 1.3% on organic. Of course, we are going to explain to you that excluding non-recruiting items, it was a bit different for reasons which are in fact not so important for the future of the group. So the net profit excluding non-recruiting items, still higher compared to previous figures some years ago, 84.6 million minus 5.6% on a reported basis and minus 8.2 on organic. Again, this will be explained. The net debt on EBITDA ratio looks a little bit less positive, but in fact, we are delighted with this result because one of the reasons why we increased a little bit our gearing, is that we were able, for the first time, on our balance sheet to report on the 30th of September, an inventory at, of course, group value, I mean reported value, at above 1 billion euro, 1 billion 270 million, which means that, in fact, we are more than ever able to provide to our clients in the future more extremely good quality cognacs, and of course now not only cognacs, rums, and more and more whiskeys, which is, of course, a very, very good sign for the future. And, of course, you won't be surprised to notice also that our net consumption financial cost, which means really the cost of the debt, was the lowest ever, really the lowest I can remember in more than 40 years with the group. Only 6 million, a little bit above 6 million euros for the last six months, which is, of course, a very good time to have very good high-quality inventory of top-quality spirits. So now, as usual, Valérie Chapulot and Luca Marotta are going to give you more details about those results, are going to give you perspectives, and will also answer, as usual, to your questions. As I hand over the mic to Valérie, I would like, on behalf of the whole Rémi Cointreau group, to thank Valérie and her team for the, I can only say the word, amazing results that she and her team have achieved for the last five years. I mean, the growth that we have had in profit during that time, the quality of the profit that we have had, and of course, the increase of value of our shares are extremely, extremely positive. And of course, Valérie and her team have prepared the group for the future. Next time, It will be Eric Valla, as confirmed, and Luca Marotta, which will present those results. For your information, Eric Valla is also present here in Paris in that room. So for those of you who can't wait for the next six months and would like already to ask questions to Eric Valla, it's still possible. But of course, it will be very difficult for him to answer to your question about the last six months. So again, thank you, Valerie. This is for you.

Thank you, Marc. Good morning, everybody. What can we say about this first semester? As Marc mentioned, the most important for us are the group run sales, which grew almost by 3%, 2.8%, which is, I would say, a mitigated situation, taking into account Two important evolutions. First of all, finally after years of effort, a very, very good start of the liquor and spirit division, almost 5% growth. And the cognac division which is slightly lower but definitely affected by some very temporary situation, one that you know for most of the groups, spirit groups, which is the Hong Kong situation. local and travel retail, and the second, which is a very unusual replenishment in the U.S. So a very good start of the year for the liquor division, liquor and spirit division, a little bit slower for cognac, but we know that it is definitely coming from external factors. What is quite consistent with the past and with our strategy is the fact that partner continue to drop significantly. Part of it has been, of course, anticipated to you and explained to you extensively with the sale of our Central Europe affiliate in Czechoslovakia. But most likely, this is part of our strategy. I remind you that the non-group brands were close to 14% 5 years ago, and they are going to be below 3% this year, which is a gap of more than 100 million euros that has been compensated at the group level. Regarding the COP, which is not the most important, but an important element of this call, the COP is very resilient in this first semester. The first semester is definitely a phasing It's facing a phasing situation, but the COP is quite resilient. What is very interesting in this COP is the fact that we continue to invest heavily, and we are going to look at the figures together. We continue to invest heavily behind our brands, and in particular in S2 that started recently. It is Thanksgiving today, so the holiday season started, and this is a peak moment for us in terms of investment, and then early Chinese New Year's to come in January. So very good resilience of the COP, based on the fact that we continue to accelerate on our investment behind our brands, but more to come in S2 for sure. The group-run COP is almost flat, plus 1%. What is very interesting as well is the fact that the way the P&L is balanced for the semester one is the fact that we have very, very strong evolution of the gross margin, almost plus four points. Four points, it's massive. And you will see per division how it is split. But globally, it's very consistent across the board, and it's a massive value strategy that is delivering. And, of course, we are not looking for volume, and it is balanced by a volume drop, but it is exactly what we want to achieve. So we have the value strategy works. It's significant during these last six months and very visible at every single level. Strong communication investment, almost plus 11%, so totally in line with our strategy as well. We have a slight currency gain, a bit less than 7%, that of course we factored in the COP. And globally, a very good resilience of the current operating margin at 26.4%, which is almost flat. The net profit growth is led by, again, on Central Europe affiliates. And globally, the non-recurring items, which is not massively significant, the net profit declined by almost 6%. If you look at the bridge, as we like to do to understand how it works, you can see that, in fact, the organic and the currencies balance each other. So it's not a big difference. In terms of organic growth per division, so also Rémy Martin plus 2%, 2 plus 1%, almost 5% on liquor and spirit. The group brand, which is the most important to us, almost 3% growth. Partner brand, a massive drop, which is Czechoslovakia, of course, decommissioning. And a slight, we will comment, a slight decrease on some partner brands that still remain in Belux. So total group, minus 3.6% in total. If we look at the breakdown of our activity per division and per region, you can see that Rémy Martin house continued to fly at 72% of our shares. Liquor and spirits, plus 2%, which is good news. And the massive drop of partner brands, as I said, is going to be less than 3% for the fiscal. And by region, the Americas, and we'll see why, still continue to grow, still not 50% of our activity, but getting there at 45%, mainly thanks to Liquor and Spirits for this fiscal and many thanks to Cointreau. Within each division, Americas almost flat for Rémy Martin, who has on Liquor and Spirits plus five points, which is coming from Cointreau, and the rest is quite stable. In terms of COP, current operating profits, the bridge is very interesting. You can see that the price mix, as I was mentioning, the value strategy works, plus 30.9 million. It's massive, balanced by a volume mix at almost minus 21 million. It is exactly what we want to achieve. The price mix is absolutely phenomenal. one of the best evolution for the last five years and demonstrating that month after month, semester after semester, year after year, we continue and it delivers. The ANP, the investments are the plus 11% that I was mentioning, plus 7.5, and the best is to come because effectively, as I mentioned, the holiday season just started this week. So in reality, when you look at the bridge, you understand why the current operating profit is quite stable in value, 138.3 million. The net profit, not a massive change. Net profit excluding non-recurring item, minus 5.6%. We are talking about 5 million. It's not very significant. And when we look at net profit group share, the same reported 3.5%. We are talking about 3 million difference. When we look at each division in terms of activity, what happened in semester one, as I said, Remy Martin, we are looking for value, not for volume. So you can see that the volume is at minus 5%, which is in a way going to the right direction, having in mind that for some qualities, we are definitely, and it is our own decision, we are under allocation. So there is a balance between the regions. It's quite obvious for S1. We'll see what's going to happen in S2 because, you know, the macroeconomic factors are very complicated today and very volatile and very complicated today to anticipate. So Asia Pacific, we know that on China Home, we had a massively good Mid-Autumn Festival. It's confirmed, but not only Mid-Autumn Festival. For the first, we are looking at the board this week, doing the board this week at the first eight months, It's a massive success in China, so Mid-Autumn Festival does confirm, double digit on most qualities, and it's usually a very good signal for Chinese New Year, which is going to come very soon, late January. Unfortunately, this performance of China Home is massively balanced by a very unique situation in Hong Kong Home and travel retail. Today, because of our cognac, situation we are much more maybe exposed than others to Hong Kong and the borders and travel retail Asia is a massive part of our activity in travel retail so we are as per today we will see what's going on in Hong Kong but we are facing a quite negative situation on Hong Kong home and Hong Kong travel retail and borders In America, we just got last night the last NAPCA figures. We can see that we are catching up. For your information, we are facing the anniversary of the second price increase in cognac of 2018 of last year. We can see that our depletion and sell-out start to recover, which is very good news. But today, effectively, we have a slower start of America. U.S. in particular, but we are very confident for the second part of the year, and as the holidays start, we will have very soon a very good idea of the temperature of the market. But the last NABCA, Nielsen, and depletion are going and moving to the right direction. EMEA, very uneven as usual. You know that EMEA is a massive patchwork. We have a very good start of the year in Africa. You know that we are betting on Africa for the medium-long term, so very good dynamism. And we have as well a very good start of the year in UK and Nordics and travel retail EMEA, which is the opposite of travel retail Asia. In terms of newness and activity, we just launched a new quality in the U.S., which name is Tercei. Very, very interesting, sophisticated launch and positioning, above 100 US dollar retail price, with a fantastic welcome from the market. Just the start, we are going to build it step by step, mostly non-trade, and very, very few fine wine stores, but a fantastic and unique positioning of Terce, and in a few months, we will look at it in China as well. New campaign that is just on air as we speak in most continents of the world, Asia, Africa, a bit of Europe, and U.S. We call it Team Up for Excellence. Very good welcome as well. This is a fantastic opportunity to express who we are as Rémi Martin, and the campaign will be tuned mostly on EXO, 1738 in America and Europe, and club, of course, in Asia. When it comes to Louis XIII regarding the house of Rémy Martin, we just introduced for the first time a limited edition that we call André Herdiard-Dubreuil, to pay tribute to André Herdiard-Dubreuil. It's a black pearl offer. For the first time, it's a 50 CL, absolutely unique. It's a different liquid. It's a different decanter. But for the first time, this offer is not available in retail. We sell it only to direct clients, the clients we know, and it's impossible to find this offer today in any retailer in the world. So it's a new format of approach for Louis XIII as we speak. If you travel to Singapore, I invite you to stop by our pop-up store in Changi Airport. This is a very interesting and important moment because we are totally able to express what it is we are talking about. It's like one of the best boutiques that we can offer. This boutique will rotate in Shanghai airport for 12 months from a terminal to another one. And of course we have a limited offer and special approach of the brand within this pop-up store. When we look at the bridge of the COP, of the current operating profit of Rémy Martin, the house of Rémy Martin, you see fully the value strategy, how it works, a massive price mix effect, plus 26 million, balanced by the volume mix that we like, minus 14, and the NP that are quite a little bit shy to start in S1 because the new campaign just started in October. So you will see it with Eric and Luca for semester two. When it comes to liquor and spirits, it's great news because we are looking at this kind of result for a few years now. And you will see that it is fueled by different brands. The most interesting and important is definitely Cointreau for many good reasons. Cointreau, as you know, we totally repositioned a year ago, a bit more, 18 months ago. It took us six months to start to see some results behind our heavy investment, in particular in the US. I'm very happy to mention that Cointreau in the US is double digit now for almost more than a year. And what is very interesting is that Cointreau is starting to catch up in many, many other countries following the U.S. because now we have the right business model and the right toolbox. Canada, Puerto Rico, Mexico, and most likely Australia. And you know that the mixology triangle of the world is U.K., U.S., and Australia. So it's not a big surprise that Australia is picking up double digit as well on Cointreau. And they are investing behind Cointreau with a new campaign for already a year. So Cointreau starts to pick up. It's a massive success. And we are sure that it's just a start for the brand. On the rest of the portfolio, Metaxa is doing very well in new frontier like Asia and America. Slightly more complicated in Europe because we have some route to market change. But we know that Greece, for example, which is massive for travel retail, is doing extremely well. We had a very good summer, which is the key moment for Metaxa, which gives us a lot of confidence, in particular on the quality we want to support, which is 12-star. Saint-Rémy, solid performance. We have a very good marketing initiative. I don't want to reveal anything, but we have a very, very interesting and strategic initiative to come next year. But the key markets are delivering. Canada in particular, U.S. is waking up, and travel retail, which is, I remind you that Saint-Rémy is number one in travel retail in the world, is doing very well and is very solid for the start of the year. The botanist, big success. It's a massive double-digit growth. We continue our strategy. We know that liquid tulips is fundamental, is key, and is 100% success. We are looking at accelerating our distribution strategy, in particular in the U.S. And even in Asia Pacific, where white spirits are not so big, we can see a very big interest behind the botanist. When it comes to whiskeys, we have a very fast growth almost everywhere. in EMEA, in China, in Japan, and travel retail. We have much more high comps in the U.S., but we know that when it comes to our Scottish brands, we are where we should be with a selective approach now. We have refazed everything in the last 18 months. We are starting to expand a little bit, but step-by-step, Westland in some markets, a little bit in Asia, a little bit in Europe. As we speak, it's happening now. So, for example, a market like France is one of the few markets, if not the only market in the world, that is able to sell our three distilleries, Brooklady Distilleries, Westland, and Domaine des Hauts-Glaces. And we will see, step by step, how we are going to roll out Westland in particular, Domaine des Hauts-Glaces. It's another story. We are organic. We are very small. We are building stock. And, by the way, the new distillery is on air, as we speak, in late 2019. When it comes to Mange, you remember that Mange is under full repositioning. We are presenting all over the world the repositioning of Mange. That is going to happen most likely at the end of Q4. Very nice welcome to start. It will take a bit of time, but we are very confident that it is the right direction for the brand. In terms of actuality and newness, a big push of Cointreau because it was the 170th anniversary of Cointreau. big events in Q1, in particular in Paris, but not only. We are delivering, as we speak, the limited edition of Vincent Daré, the French designer, for which we have a big, big welcome. So it's going to be an interesting end of the year. Metaxar continues its international expansion. We have a very interesting partnership with Clemsis. I remind you that Clemsis is... number six bar in the world and based in Athens. By the way, the Athens Bar Show just ended a few days ago and is becoming a key, key moment, which is excellent for us, by the way, a key, key moment during the year ahead of London and we think it's going to become, by the way, as important in terms of halo effect as Berlin Bar Show. So this is great news and our partnership with the Clemson is definitely helping us to reposition the brand on the cocktail approach and mixology approach which the brand deserves. When it comes to Octomore, and that's why maybe we are a bit late in S1, the 10th series has just been issued, that's why we have sometimes some phasing issues on whisky, but Octomore is, as we speak, delivered, and the 10th series is a very interesting liquid as we like to have. When it comes to the bridge of COP for liquor and spirits, we report growth of 1.6%. You can see that there is almost no effect on the volume, but a very good price mix, which is good for this kind of positioning, because it's quite complicated for some of these brands to go for price increase. But the price mix is very good, plus 4.5 million. And you can see that we continue to invest behind the brand, but as well, the holiday season starts So the best is to come. Not going to be long on partner brands. You know exactly what happened. Big drop in value and in volume. It's quite an interesting acceleration. And, of course, we know exactly what's happening. And we are going to be below 3%. It's a combination of Czech Republic and a little bit of leftover of stock of Piper Sonoma in the U.S. And as I mentioned, the little partner brands we have mostly in Bellox is still suffering because of the Belgian market in particular. So I'm very happy now to pass the mic to Luca Marotta, who's going to enter in detail regarding the financial part of the S1. Luca, the mic is yours.