Earnings Release • Oct 27, 2022
Earnings Release
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Strong performance in the nine months thanks to robust brand momentum and pricing effect, further boosted by positive exchange rates effects
In the third quarter sustained topline growth continued whilst gross margin reflected the expected heightened inflationary pressure on costs and geographic mix
Business development initiatives continue with the acquisition of minority equity stake in spirits brand incubator Catalyst Spirits
Milan, October 27th , 2022-The Board of Directors of Davide Campari-Milano N.V. (Reuters CPRI.MI-Bloomberg CPR IM) approved the additional financial information at September 30th, 2022.
Bob Kunze-Concewitz, Chief Executive Officer: 'Overall, our strong topline performance continued over the key summer season thanks to strong brand momentum, continued on-premise strength and favourable weather as well as the initial impact of the price increases, which have been successfully implemented during the nine months. Looking at the remainder of 2022, we remain confident about the positive business momentum with the outperformance of our key brands vs. reference markets thanks to their strong brand equity. From a shipment standpoint, we expect trends to normalise in the last quarter reflecting seasonal sales mix as well as supply chain challenges in selected areas. Concomitantly, volatility and uncertainty remain due to the ongoing pandemic, geopolitical tensions and elevated inflationary pressure, with the latter to be mitigated by pricing. Overall, notwithstanding the margin dilution in the third quarter due to the expected heightened inflation on cost of goods sold and a less favourable sales mix, we confirm our full year guidance of flat organic margin in EBIT-adjusted (1) . Regarding the exchange rate effect, we expect a continued positive contribution driven by the US dollar. Looking at the medium term, we remain confident in the strength of our brands, enabling adequate pricing actions, to navigate through the current challenges.'.
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1 Guidance provided upon full year 2021 results release on February 23rd 2022.
| 9M 2022 | 9M 2021 | Reported | Organic | Perimeter | Forex | Org change |
Org change CAGR |
|
|---|---|---|---|---|---|---|---|---|
| € million | € million | Change | change | Impact | Impact | vs. Q3 2021 |
9M 2022- 19 |
|
| Net sales | 2,005.7 | 1,575.7 | 27.3% | 19.0% | -0.2% | 8.5% | 18.6% | 13.7% |
| Gross profit | 1,210.1 | 961.2 | 25.9% | 15.8% | 0.3% | 9.8% | 10.5% | 11.9% |
| % on sales | 60.3% | 61.0% | ||||||
| EBIT-adjusted | 492.2 | 359.8 | 36.8% | 21.5% | 0.9% | 14.4% | 10.6% | 16.6% |
| % on sales | 24.5% | 22.8% | ||||||
| EBIT | 466.1 | 350.1 | 33.1% | |||||
| Group profit before taxation-adjusted | 483.3 | 343.3 | 40.8% | |||||
| Group profit before taxation | 452.7 | 341.2 | 32.7% | |||||
| EBITDA-adjusted | 557.8 | 418.0 | 33.4% | 19.5% | 0.8% | 13.1% | 10.8% | 15.0% |
| % on sales | 27.8% | 26.5% | ||||||
| EBITDA | 531.7 | 408.4 | 30.2% | |||||
| Net financial debt at the end of the period | 961.2 |
Group sales totalled €2,005.7 million, up +27.3% on a reported basis or +19.0% in organic terms (+18.6% in the third quarter). The perimeter effect was -0.2% while the FX effect was +8.5% (or €133.5 million) mainly driven by the strong US Dollar.
Analysis of organic change by geography:
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2 Includes Global Travel Retail.
Gross profit totalled €1,210.1 million, corresponding to 60.3% of net sales, up by +25.9% in value on a reported basis. It grew organically by +15.8%, a margin dilution of -160 basis points, largely impacted by the expected dilution in the third quarter (-430 bps), due to heightened costs inflation, particularly logistics, and less favourable sales mix (i.e. outperformance of South America and Espolòn), only partially mitigated by the initial impact of successful price increases.
Advertising and Promotion expenses (A&P) were €328.6 million, corresponding to 16.4% of net sales, up by +22.5% in value on a reported basis. They increased organically by +14.8%, reflecting sustained investments behind key brands, +60 basis points margin accretive thanks to strong topline.
CAAP (Contribution after A&P) was €881.5 million, corresponding to 43.9% of net sales, up by +27.2% in value on a reported basis and up +16.2% organically.
Selling, general and administrative expenses (SG&A) totalled €389.3 million, corresponding to 19.4% of net sales, up by +16.9% in value on a reported basis. They grew organically by +10.5%, lower than net sales, hence generating a margin accretion of +150 basis points.
EBIT-adjusted was €492.2 million, corresponding to 24.5% of net sales, up by +36.8% in value on a reported basis. It grew organically by +21.5% (+10.6% in the third quarter), generating an accretion of +50 basis points. The perimeter effect on
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EBIT-adjusted was +0.9%. The forex effect on EBIT-adjusted was positive by +14.4% (or €51.7 million), mainly driven by the strong US Dollar.
Operating adjustments were negative at -€26.1 million, mainly attributable to provisions linked to the Russia/Ukraine conflict, restructuring initiatives and long-term retention schemes.
EBITDA-adjusted was €557.8 million, up by +33.4% in value on a reported basis (up organically +19.5%), corresponding to 27.8% of net sales.
EBIT (23.2% of net sales) and EBITDA (26.5% of net sales) were at €466.1 million and €531.7 million respectively.
Net financial expenses and adjustments were €10.9 million. Excluding the exchange gains and the financial adjustments, the net financial expenses were €14.1 million, (vs. €19.0 million for the first nine months 2021), showing a decrease of €5.0 million thanks to higher interest income generated by existing liquidity.
Group profit before taxation was €452.7 million. Group profit before taxation adjusted was €483.3 million, up +40.8% vs. the first nine months 2021.
Net financial debt at €961.2 million as of September 30th , 2022, up €130.2 million vs. 31 December 2021 (€830.9 million), mainly driven by the acquisitions, the net purchase of own shares, the dividend payment, as well as cash absorption of planned working capital increase due to buffer stock inventory recovery.
Net debt to EBITDA-adjusted ratio at 1.5 times as of 30 September 2022, improved from 1.6 times as of 31 December 2021 and from 1.8 times as of 30 September 2021.
Following the purchase of an initial minority stake in flavored bourbon Howler Head with exclusive global distribution rights3 , Campari Group recently acquired a minority stake in London-based Catalyst Spirits, a global spirits brand incubator company and the main shareholder of Howler Head. Helmed by industry veteran Simon Hunt, Catalyst Spirits' mission is building and rapidly growing digitally native premium brands, matching each brand in the pipeline with the right entertainment/marketing platform.
* * *
The additional financial information at September 30th, 2022 is available to the general public on the Company's website (https://www.camparigroup.com/en/page/investors) and by all other means allowed by applicable regulations.
The Board of Directors is responsible for preparing the additional financial information for the nine months ended September 30 th , 2022, in accordance with the Dutch Financial Supervision Act and the applicable International Financial Reporting Standards (IFRS).
This press release contains certain forward-looking statements relating to the Campari Group. All statements included in this press release concerning activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the following: volatility and deterioration of capital and financial markets, changes in general economic conditions, economic growth and other changes in business conditions, changes in government regulation and other economic, business and competitive factors affecting the businesses of Campari Group. Such factors include, but are not limited to: (i) changes in the laws, regulations or policies of the countries where Campari Group operates; (ii) the adoption, both at a global level and in the countries where Campari Group operates, of restrictive public policies that have an impact on the production, distribution, marketing, labelling, importation, price, sale or consumption of alcoholic products; (iii) long-term changes in consumers' preferences and tastes, social or cultural trends resulting in a reduction in the consumption of products of the Campari Group as well as in purchasing patterns and the ability of Campari Group to anticipate these changes in the marketplace; and (iv) increased production costs and volatility of raw materials' prices. Therefore, Campari and its affiliates, directors, advisors, employees and representatives, expressly disclaim any liability whatsoever for such forward-looking statements.
These forward-looking statements speak only as of the date of this document and Campari does not undertake an obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.
ANALYST CONFERENCE CALL
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3 See press release of August 24th, 2022
Campari's management team will host a conference call to present the Group's First Nine Month 2022 results today at 1:00 pm (CET). Please note that the format of the call has been changed to incorporate a live webcast of the presentation. To participate via webcast (listen only):
To participate via audio and ask questions, please dial one of the following numbers:
A digital playback of the conference call & webcast will be available from today, until Thursday November 3rd, 2022. To listen to it, please call the following number:
• (+39) 02 802 09 87
(Access code: 700953#) (PIN: 953#)
The presentation slides available to download from Campari's Investor Relations Home Page at the address:
| Investor Relations | ||
|---|---|---|
| Chiara Garavini | Tel. +39 02 6225330 | Email: [email protected] |
| Jing He | Tel. +39 02 6225832 | Email: [email protected] |
| Thomas Fahey | Tel. +44 (0)20 31009618 | Email: [email protected] |
| Corporate Communications Enrico Bocedi |
Tel. +39 02 6225680 | Email: [email protected] |
| https://www.camparigroup.com/en/page/investors | ||
| http://www.camparigroup.com/en |
http://www.camparigroup.com/en http://www.youtube.com/camparigroup https://twitter.com/GruppoCampari
https://www.linkedin.com/company/campari-group
Campari Group is a major player in the global spirits industry, with a portfolio of over 50 premium and super premium brands, spreading across Global, Regional and Local priorities. Global Priorities, the Group's key focus, include Aperol, Campari, SKYY, Grand Marnier, Wild Turkey and Appleton Estate. The Group was founded in 1860 and today is the sixth-largest player worldwide in the premium spirits industry. It has a global distribution reach, trading in over 190 nations around the world with leading positions in Europe and the Americas. Campari Group's growth strategy aims to combine organic growth through strong brand building and external growth via selective acquisitions of brands and businesses.
Headquartered in Milan, Italy, Campari Group operates in 22 production sites worldwide and has its own distribution network in 23 countries. Campari Group employs approximately 4,000 people. The shares of the parent company Davide Campari-Milano N.V. (Reuters CPRI.MI - Bloomberg CPR IM) have been listed on the Italian Stock Exchange since 2001. For more information: http://www.camparigroup.com/en. Please enjoy our brands responsibly.
- Appendix to follow -
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| % on Group sales |
% change, of which: | ||||
|---|---|---|---|---|---|
| total | organic | external growth | exchange rate effect |
||
| Global Priorities | 59.5% | 29.4% | 21.2% | - | 8.2% |
| Regional Priorities | 23.8% | 32.1% | 23.5% | 0.1% | 8.5% |
| Local Priorities | 8.3% | 17.4% | 7.2% | 6.0% | 4.2% |
| Rest of portfolio | 8.4% | 11.8% | 5.3% | -7.7% | 14.2% |
| Total | 100.0% | 27.3% | 19.0% | -0.2% | 8.5% |
| % on Group sales |
% change, of which: | |||||
|---|---|---|---|---|---|---|
| total | organic | external growth | exchange rate effect |
|||
| Americas | 45.3% | 35.9% | 18.7% | -0.1% | 17.3% | |
| Southern Europe, Middle East and Africa | 28.4% | 22.4% | 23.3% | -1.1% | 0.2% | |
| North, Central & Eastern Europe | 19.5% | 22.3% | 18.3% | 0.6% | 3.4% | |
| Asia Pacific | 6.8% | 11.6% | 5.6% | 0.9% | 5.1% | |
| Total | 100.0% | 27.3% | 19.0% | -0.2% | 8.5% |
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| 1 January-30 September 2022 |
1 January-30 September 2021 |
||||
|---|---|---|---|---|---|
| € million | % | € million | % | Change | |
| Net sales | 2,005.7 | 100.0% | 1,575.7 | 100.0% | 27.3% |
| Cost of goods sold(1) | (795.6) | -39.7% | (614.5) | -39.0% | 29.5% |
| Gross profit | 1,210.1 | 60.3% | 961.2 | 61.0% | 25.9% |
| Advertising and promotional costs | (328.6) | -16.4% | (268.2) | -17.0% | 22.5% |
| Contribution margin | 881.5 | 43.9% | 692.9 | 44.0% | 27.2% |
| SG&A(2) | (389.3) | -19.4% | (333.1) | -21.1% | 16.9% |
| Result from recurring activities (EBIT-adjusted) |
492.2 | 24.5% | 359.8 | 22.8% | 36.8% |
| Other operating income (expenses) | (26.1) | -1.3% | (9.7) | -0.6% | - |
| Operating result (EBIT) | 466.1 | 23.2% | 350.1 | 22.2% | 33.1% |
| Financial income (expenses) and adjustments | (10.9) | -0.5% | (10.4) | -0.7% | 4.5% |
| Put option, earn out income (expenses) and hyperinflation effects |
0.8 | - | (0.2) | - | - |
| Profit (loss) related to associates and joint ventures | (2.3) | -0.1% | 1.6 | 0.1% | - |
| Profit before taxation | 453.7 | 22.6% | 341.1 | 21.6% | 33.0% |
| Non-controlling interests before taxation | 0.9 | - | (0.1) | - | - |
| Group profit before taxation | 452.7 | 22.6% | 341.2 | 21.7% | 32.7% |
| Group profit before taxation-adjusted | 483.3 | 24.1% | 343.3 | 21.8% | 40.8% |
| Total depreciation and amortisation | (65.5) | -3.3% | (58.2) | -3.7% | 12.6% |
| EBITDA-Adjusted | 557.8 | 27.8% | 418.0 | 26.5% | 33.4% |
| EBITDA | 531.7 | 26.5% | 408.4 | 25.9% | 30.2% |
(1) Includes cost of material, production and logistics costs.
(2) Includes selling, general and administrative costs.
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| 3Q 2022 | 3Q 2021 | Change | ||||
|---|---|---|---|---|---|---|
| € million | % | € million | % | % | ||
| Net sales | 748.8 | 100.0% | 574.8 | 100.0% | 30.3% | |
| Gross profit | 443.7 | 59.3% | 357.6 | 62.2% | 24.1% | |
| Contribution margin | 317.8 | 42.4% | 251.2 | 43.7% | 26.5% | |
| Result from recurring activities(EBIT adjusted) |
181.3 | 24.2% | 136.6 | 23.8% | 32.7% | |
| Operating result (EBIT) | 177.2 | 23.7% | 133.0 | 23.1% | 33.3% | |
| Profit before taxation | 171.4 | 22.9% | 126.7 | 22.0% | 35.3% | |
| Non-controlling interests before taxation | 0.3 | - | - | - | - | |
| Group profit before taxation | 171.1 | 22.9% | 126.6 | 22.0% | 35.1% | |
| Group profit before taxation adjusted | 179.6 | 24.0% | 130.1 | 22.6% | 38.1% | |
| EBITDA adjusted | 204.8 | 27.3% | 156.3 | 27.2% | 31.0% | |
| EBITDA | 200.7 | 26.8% | 152.7 | 26.6% | 31.5% |
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