Remy Cointreau Unsp/Adr

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

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

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