Campari net profits drop 17% as UK sales of Aperol rise 56%

Net profits of Campari dropped by 16.8% in 2018, according to its full year 2018 results, but were buoyed by growing sales of Aperol, which in the UK alone grew by 56%.

Bob Kunze-Concewitz, chief executive officer of Campari

Announcing its full year results this morning, Campari reported total sales of €1.71 billion, representing organic growth of +5.3%, but a reported decline of -2.4%.

Gross profits increased to €1.02 billion, representing organic growth of 7.4% and reported growth of 1.6%.

EBIT was adjusted to €378.8 million, representing organic growth of 7.6% and reported drop of 0.4%, while group net profits fell 16.8% to €296.3 million on a reported basis, below analysts’ expectations.

“We achieved a solid performance across all key indicators in terms of organic growth and margin expansion in full year 2018, consistently delivering on long term strategy,” said Bob Kunze-Concewitz, chief executive officer of Campari.

“In particular, over the past four years Campari Group has achieved +680bps of gross margin expansion on sales on a cumulative basis, as the combined result of very healthy organic expansion of +390bps, driven by favourable sales mix, and accretive M&A initiatives, including strategic divestments, and FX contributing the remainder.

“This remarkable achievement has enabled strengthened investments in brand building and commercial initiatives for long-term, sustainable growth.”

The year saw Campari benefit from the selling-off of the Italian Lemonsoda business, generating €80.2m, and also acquire Cognac producer Bisquit for €52.7m.

The Americas

By region, the Americas, which accounts for 43.5% of the group’s sales, showed positive organic growth of 6.7%, driven by the double-digit growth of Espolòn, Aperol and Campari, as well as the positive trends of Wild Turkey, Grand Marnier and the Jamaican rums.

This result helped offset the decline in SKYY vodka, which continued to be affected by de-stocking.

“SKYY sales registered an organic change of -8.1%, due to weakness in the US market, as the brand continues to be impacted by de-stocking activity, with the gap between the brand’s sales and more positive consumption data progressively reducing, as well as continued strong competitive pressure and reduced innovation in infusions,” the producer said.

“In the international markets, the positive results achieved in Argentina, Australia, China, Mexico, Italy and the UK offset the declines in Brazil, Global Travel Retail and Germany.”

Sales of Aperol grew by 56% in the UK alone in 2018

Europe, Africa and the Middle East

Sales in Southern Europe, Middle East and Africa (accounting for 28% of total sales) reported organic growth of 4.9%. Italy in particular registered a “very solid organic growth” of 3.6%, driven by the double-digit growth in Aperol (+15.3%) and Campari (+7.4%), as well as positive trends in Braulio, Espolòn and SKYY, which offset weaker sales of Crodino, Campari Soda and Cinzano sparkling wines, the producer said.

Sales in North, Central and Eastern Europe (21% of group sales) increased by 3.4%.

Sales in the UK (1.9% of total group sales) registered an organic growth of +19.1%, driven by Aperol (+56.0%), Campari (+39.3%), Bulldog (+24.8%), Appleton Estate (+25.4%) and Wray&Nephew Overproof (+12.6%).

Sales in Germany reported organic growth of 6.5%, mainly driven by Aperol (+22.6%) and Campari (+13.9%), as well as the positive trends from Bulldog and Grand Marnier.

Asia Pacific

Asia Pacific (which accounts for just 7.5% of Campari’s sales) reported the biggest growth of 12.9%, driven by Wild Turkey bourbon, Espolòn, GlenGrant, SKYY, Campari and Frangelico.

“Looking ahead into 2019, our outlook remains fairly balanced in terms of risks and opportunities as uncertainty around macroeconomic instability and currency volatility, particularly in emerging markets, remain,” added Kunze-Concewitz.

“We expect the current underlying business performance to keep its momentum, while we continue facing headwinds from agave purchase price hike. Nevertheless, we remain confident in achieving a positive performance across the key underlying business indicators in 2019, driven by the continued outperformance of the high-margin Global & Regional priority brands in key developed markets.”

Overall, net financial debt stood at €846.3 million as of December 31 2018, down from €981.5 million on 31 December 2017. The Italian spirits maker proposed a dividend of €0.05 per share for 2018, leaving it unchanged with the year before.

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