Gruppo-Campari boosts sales despite profit decline

Gruppo-Campari on Tuesday reported a 3.1% revenue boost to €1.2bn ($1.3bn) for the 9-months to September 2016, driven by sales acceleration of global and regional priority brands in key high-margin developed markets, such as North America and Western Europe.

The company said that the organic performance of its operating margin was helped by investments in marketing and the strengthening of its distribution capabilities, particularly in the US. It noted that the company also began to benefit from the positive contribution of Grand Marnier business (€43.8m to group sales), which was acquired in the period under review, plus the termination of some distribution agreements and sale of non-core businesses.

Gross profit for the maker of Sky Vodka and Campari rose 7.3% to €677.6m. However, pre-tax profits declined 26.3% to €131.5m ($145m) due to the Grand Marnier transaction costs, restructuring projects and debt financing. The company acquired Grand Marnier and its parent company in March for €682.9m.

Looking at sales by region the U.S. became the group’s largest maket, ahead of Italy and accounting for 25.3% of total group sales and 60% of the America’s region. Sales in the U.S. rose 4.8%, bolstered by strong performance of Wild Turkey and the Aperitifs (Aperol and Campari). In Brazil, organic sales declined by 11.8%, blamed on the ongoing macroeconomic challenges in that country.

Southern Europe, Middle East and Africa saw a 2% sales boost, driven by very positive results of Campari and Aperol in France and Spain which partially offset declines in Nigeria, where macroeconomic conditions remain negative. Sales in the group’s home market of Italy remained flat at 0.1%. In South Africa, the company said it was in the process of realigning its route-to-market by setting up an in-market company to directly distribute its own brands and leverage the growth potential of its premium portfolio such as Sky Vodka and GlenGrant.

In North, Central and Eastern Europe sales grew by 10.5%, as a result of a -3.1% exchange rate effect, mainly driven by the devaluation of the Russian rouble, and a neutral perimeter effect. Sales in Germany rose 6.3% organically, while the U.K. had an equally good performance, driven by Aperol and Campari.

Sales in Asia Pacific region grew 3.7%, helped by the Grand Marnier acquisition.

Our nine months 2016 results reflected the consistent execution of our growth strategy. Looking at the remainder of the year, the current outlook remains broadly unchanged. Although not further deteriorating, the macroeconomic environment, particularly the emerging markets, and key currencies are expected to remain volatile. At the same time, we remain confident to deliver a positive and profitable performance, driven by the high-margin Global Priorities, particularly the aperitifs, American whiskies and Jamaican rums, thanks to sustained brand building investments.

Moreover, we expect to continue to achieve a positive performance in the core strategic regions sustained by the Group’s strengthened route-to-market,” said Bob Kunze-Concewitz, Gruppo-Campari CEO.

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