Davide Campari-Milano N.V. · MIL:CPR
Davide Campari-Milano — FY2018 Earnings Presentation
70 slides from Davide Campari-Milano's earnings presentation, Mar 5, 2019
Slide 1: 2018 Full Year Results
2018 Full Year Results Investor Presentation 5 March 2019
Slide 2: Table of contents
Table of contents Results Summary Sales Results ‒ By region ‒ By brand Operating Results by Region Consolidated P&L Cash Flow & Net Financial Debt Conclusion & Outlook Annex 2 Full Year results ended 31 December 2018
Slide 3: Results for full year ended 31 December 2018
Results for full year ended 31 December 2018 Consistent solid performance across all key underlying indicators (1) FY 2017 results restated according to IFRS15 implementation as of 1 January 2018. Under IFRS15 certain A&P expenses are reclassified in deduction of sales. In full year 2017 restated, t
Slide 4: Key highlights
Key highlights Sustained organic growth, fuelling investments back into the business > Net Sales • Positive organic growth in FY 2018 (+5.3%) thanks to a continuous improvement in sales, driven by the Global Priorities • Continuous improvement in sales mix thanks to the consistent outperformance of
Slide 5: Delivering on strategy
Delivering on strategy Continued positive margin momentum driven by strong organic performance of Global Priorities > Strong gross margin expansion driven by sales mix improvement, fuelling consistent re-investments in brand building and business infrastructure for future growth Organic net sales gr
Slide 6: Positive overall organic sales growth
Positive overall organic sales growth Continuous sales mix improvement driven by key high-margin Global and Regional Priorities in core developed markets > Americas: weakness in South America (-11.3%), especially in > Global Priorities: overall strong full year performance (+8.9%), Argentina, was mo
Slide 7: Table of contents
Table of contents Results Summary Sales Results ‒ By region ‒ By brand Operating Results by Region Consolidated P&L Cash Flow & Net Financial Debt Conclusion & Outlook Annex 7 Full Year results ended 31 December 2018
Slide 8: Net sales results for Full Year 2018
Net sales results for Full Year 2018 Growth drivers Organic change +5.3% +5.6% -0.3% -4.2% -3.4% % change +92.1 -73.5 -60.2 €million 1,753.4 1,816.0 1,711.7 > Organic change of +5.3% (after excluding the price effect in Argentina of 30bps)(1) or €92.1 million, largely driven by high-margin Global Pr
Slide 9: Net sales by regions & key markets in FY 2018
Net sales by regions & key markets in FY 2018 The US is the largest market with 26.0% of Group Net Sales FY 2018 Group Net Sales €1,711.7 million Organic growth +5.3% Asia Pac: 7.5% of total Americas: 43.5% of total Organic growth: +12.9% Organic growth: +3.9% NCEE: 21.0% of total SEMEA: 28.0% of to
Slide 10: Americas: +3.9% organic
Americas 43.5% Americas: +3.9% organic % change +3.9% -7.2% -1.7% Regional net sales organic growth €million 783.6 +30.3 -56.1 -13.1 744.7 by quarter Q1 Q2 Q3 Q4 2018 2.9% 6.0% 4.7% 2.1% 2017 8.0% 7.4% 5.6% 9.4% (1) Organic growth by key market North America: +6.7% > US +4.4% • Solid full year perfo
Slide 11: SEMEA: +4.9% organic
(1) SEMEA: +4.9% organic SEMEA -0.1% -9.1% 28.0% % change +4.9% Regional net sales organic growth €million 501.2 +24.7 -0.6 -45.6 479.8 by quarter Q1 Q2 Q3 Q4 2018 1.1% 6.3% 9.6% 2.8% 2017 1.4% 3.8% 7.4% 8.9% (2) Organic growth by key market > Italy +3.6% • Very solid full year performance driven by
Slide 12: NCEE: +6.2% organic
NCEE: +6.2% organic NCEE 21.0% +6.2% -2.3% -0.5% % change Regional net sales organic growth €million 347.2 +21.4 -8.1 -1.6 358.9 by quarter Q1 Q2 Q3 Q4 2018 -3.8% 14.4% 13.9% -0.2% 2017 11.5% 15.5% 3.8% 1.9% (1) Organic growth by key market > Germany +6.5% • Very satisfactory results in Germany larg
Slide 13: Asia Pacific: +12.9% organic
Asia Asia Pacific: +12.9% organic Pacific 7.5% % change +12.9% -7.2% 0.0% Regional net sales organic growth €million 121.3 +15.7 -8.7 0.0 128.3 by quarter Q1 Q2 Q3 Q4 2018 17.8% 11.7% 19.2% 6.0% 2017 -1.1% 6.4% -3.5% -2.9% Organic growth by key market > Australia +10.5% • Strong performance and sust
Slide 14: Table of contents
Table of contents Results Summary Sales Results ‒ By region ‒ By brand Operating Results by Region Consolidated P&L Cash Flow & Net Financial Debt Conclusion & Outlook Annex 14 Full Year results ended 31 December 2018
Slide 15: Net sales by key brand
Net sales by key brand Global Priorities Regional Priorities Local Priorities 56% of Total 17% of Total 12% of Total Organic change: +8.9% Organic change: +2.8% Organic change: -1.5% Rest of Portfolio: 15% (1) Agency brands & Co-packing 7.5% Rest of own brands 7.5% FY 2018 Group Net Sales €1,711.7 m
Slide 16: Mixology in focus: Top Ten cocktails 2019
(1) Mixology in focus: Top Ten cocktails 2019 Campari Group provides premium spirits for each of the top ten cocktails in the world #1 Old Fashioned #2 Negroni #3 Whisky Sour #4 Daiquiri #5 Manhattan • Campari • Wild Turkey 101 • Wild Turkey 101 • Wild Turkey 101 • Appleton Estate • Bulldog / O’ndin
Slide 17: Aperol (16% of Group sales): +28.1%
(1) Aperol (16% of Group sales): +28.1% Global priorities Top 5 markets by value > Italy > Germany Organic growth in sales value > US (5y average growth: +17.0%) > Austria > Switzerland > Strong double-digit sales growth in the full year building on an outstanding performance from previous years tha
Slide 18: Spreading the orange wave in 2018
Spreading the orange wave in 2018 Global priorities Orange slopes – Happy Together Winter Tour 'Aperol Big Spritz Social' – May 2018 This winter, the ski slopes turned orange Shoreditch in East London in the heart of the dolomites as Aperol was awash with Orange in chose Madonna di Campiglio for an
Slide 19: Campari (10% of Group sales): +5.1%
(1) Campari (10% of Group sales): +5.1% Global priorities Top 5 markets by value > Italy > US > Campari registered positive growth of +5.1% in the year, building on the positive trends in the previous four > Germany years. Overall performance was hindered by a double-digit volume decline in Argentin
Slide 20: Cocktail focus: essential for mixology
Cocktail focus: essential for mixology Global priorities ’75th Venice International Film Negroni week: 10,000 bars in 69 Festival’ – September 2018 countries – June 2018 Following the success of Negroni week from its inception in 2013 With the aim of confirming its ever- (100 bars), some of the worl
Slide 21: SKYY (9% of Group sales): -8.1%
(1) SKYY (9% of Group sales): -8.1% Top 5 markets by value Global priorities > US > South Africa > China > The SKYY franchise declined by -8.1% in FY 2018, driven by core US following the announced > Argentina destocking activity, with declines continuing into the fourth quarter (-8.0%) > Germany >
Slide 22: Celebrating the best of the US
Celebrating the best of the US Global priorities SKYY Vodka: Proudly American – 2018 campaign SKYY Vodka launched its groundbreaking 'Proudly American,‘ campaign this summer which will continue well into 2019 with a line-up of well-known sporting stars and celebrities who are ‘proudly American’. The
Slide 23: Wild Turkey (8% of Group sales): +7.0%
(1) (2) Wild Turkey (8% of Group sales): +7.0% Global priorities Top 5 markets by value > US > Australia > Very positive organic growth of +7.0% in FY 2018, while the fourth quarter registered a small decline due to a difficult comparison base from the prior year > Japan > GTR • Wild Turkey bourbon
Slide 24: Premiumisation journey
Premiumisation journey Global priorities Wild Turkey: Longbranch bourbon Wild Turkey: Russell’s Reserve 2002 – – March 2018 June 2018 Matthew McConaughey and the legendary Wild Turkey Following closely on the heels of Distillery launched Wild Turkey Longbranch, a collaboration Wild Turkey Master’s K
Slide 25: Grand Marnier (8% of Group sales): +5.2%
(1) Grand Marnier (8% of Group sales): +5.2% Global priorities Top 5 markets by value > US > Canada > In the brand’s first full year of organic performance, the brand registered positive growth of +5.2%. Double-digit growth in Q4 largely due to catch-up from Q3 > France > The launch of the ‘Live Gra
Slide 26: Live Grand: the Grand Mixes
Live Grand: the Grand Mixes Global priorities Grand Marnier: Live Grand – March 2018 & October 2018 Grand Marnier’s major new ‘Live Grand’ campaign was launched in NY in early March and in Paris during October. Between the two events, an immersive experience was created that brought the brand’s soph
Slide 27: Jamaican rums (5% of Group sales): +8.3%
(1) (2) Jamaican rums (5% of Group sales): +8.3% Global priorities Top 5 markets by value > Jamaica > US > Very positive growth for the Jamaican rum portfolio in the year (+8.3%) with continued exceptional outperformance of Wray&Nephew Overproof and positive development of Appleton Estate. > Canada
Slide 28: The authentic rum experience
The authentic rum experience Global priorities Appleton Estate: 30 year old The Joy Spence Appleton Estate Rum Jamaican rum – September 2018 Experience – Jamaica, January 2018 In September 2018, Appleton Estate 30 Year Old Appleton Estate, the oldest continuously-run sugar Jamaican Rum was released
Slide 29: Brand sales review: Regional priorities
Brand sales review Regional priorities Regional priorities Brand sales as % Organic Organic of Group’s sales change change in FY 2018 in FY 2018 in Q4 2018 Tequila > Core US market continued to grow by sustained double 3% +26.1% +11.6% digits (+30.6%) and seeding markets such as Australia, Italy, Ca
Slide 30: Brand sales review: Sparkling wine & vermouth
Brand sales review Regional priorities Regional priorities Brand sales as % Organic Organic of Group’s sales change change in FY 2018 in FY 2018 in Q4 2018 > Very positive performance of Braulio in core market of Italy (+17.0%) and seeding markets such as the US, Global Travel Italian bitters and Re
Slide 31: Brand sales review: Local priorities
Brand sales review Local priorities Brand sales as % Organic Organic Local priorities of Group’s sales change change in FY 2018 in FY 2018 in Q4 2018 3% -1.0% +0.9% > Some weakness in core Italian market > Overall negative performance in core market of Italy, impacted by a tough comparison base due
Slide 32: Table of contents
Table of contents Results Summary Sales Results ‒ By region ‒ By brand Operating Results by Region Consolidated P&L Cash Flow & Net Financial Debt Conclusion & Outlook Annex 32 Full Year results ended 31 December 2018
Slide 33: Net sales & EBIT analysis by region
Net sales & EBIT analysis by region FY 2017 (1) FY 2018 Net Sales breakdown by region EBIT (2) breakdown by region The Americas remain the Group’s largest region in terms of net sales and profitability (43.5% of Group’s net sales and 42.6% of Group’s EBIT(2) in FY 2018). Decrease in the Americas’ we
Slide 34: EBIT by region - Americas
EBIT (1) by region - Americas +60 bps 0 bps 21.8% 21.7% (60) bps (10) bps Organic change 0 bps (2) -10 bps > Organic change: EBIT adjusted organic growth of +3.7% (broadly in line with sales), thanks to positive growth across the high- margin North American region, more than offsetting weakness in A
Slide 35: EBIT by region - SEMEA
EBIT (1) by region - SEMEA 17.2% +170 bps +10 bps 17.4% (110) bps (50) bps Organic change +10 bps (2) +20 bps > Organic change: EBIT adjusted organic growth of +5.6% (+10 bps accretion), thanks to key Italian market and sustained growth in the rest of the region, in particular France, Spain and Glob
Slide 36: EBIT by region - NCEE
EBIT (1) by region - NCEE 30.8% +260 bps 32.1% (60) bps (30) bps (50) bps Organic change +170 bps (2) + 120 bps > Organic change: EBIT adjusted organic growth of +12.1%, well ahead of sales growth (+170 bps accretion), mainly driven by strong performance of aperitif portfolio across the region. Key
Slide 37: EBIT by region - Asia Pacific
EBIT (1) by region - Asia Pacific +190 bps 13.3% 14.5% +20 bps (70) bps (10) bps Organic change +190 bps (2) + 120 bps > Organic change: EBIT adjusted organic growth of +29.4%, well ahead of sales growth (+190 bps accretion), thanks to positive results across the region, in particular Australia. Key
Slide 38: Table of contents
Table of contents Results Summary Sales Results ‒ By region ‒ By brand Operating Results by Region Consolidated P&L Cash Flow & Net Financial Debt Conclusion & Outlook Annex 38 Full Year results ended 31 December 2018
Slide 39: FY2018 consolidated P&L
FY2018 consolidated P&L (3) (1) COGS = cost of materials, production and logistics expenses (2) SG&A = selling, general and administrative expenses (3) Bps rounded to the nearest ten 39 Full Year results ended 31 December 2018
Slide 40: EBIT adjusted - Key highlights
EBIT adjusted - Key highlights > Gross profit: on a reported basis up +1.6% in value, to 60.1% on sales (+230 bps accretion): • Organic growth of +7.5% in value, +120 bps margin expansion. Organic growth ahead of topline thanks to favourable sales mix by brand and market: outperformance of key high-
Slide 41: EBIT adjusted – summary effects
EBIT adjusted – summary effects € million 28.9 (12.6) (18.0) % change +7.6% -3.3% -4.7% -0.4% 380.5 378.8 +40 bps (1) % on sales 21.7% +50 bps +20 bps -30 bps 22.1% > EBIT adjusted of €378.8 million, down -0.4% on a reported basis, 22.1% margin on sales (+40 bps accretion). Key drivers: • Organic gr
Slide 42: Financial charges
Financial charges > Net financial charges at €33.8 million in FY 2018, down by €6.3 million vs. FY 2017, thanks to a reduction of average indebtedness (€925.4 million in FY 2018, down from €1,144.0 million in FY 2017) and FX > Average cost of net debt of 3.3% in FY 2018, up from 2.9% in FY 2017, ref
Slide 43: Group net profit (reported)
Group net profit (reported) (1) > Group net profit reported at €296.3 million, down -16.8%, mainly due to reduced adjustments vs. FY 2017: • Lower positive operating adjustments: €1.9 million in FY 2018, attributable to the gain on the Lemonsoda business disposal (€38.5 million), net of provisions f
Slide 44: Group net profit adjusted and EPS
Group net profit adjusted and EPS > Group net profit adjusted at €249.3 million, up +6.8%, mainly due to: • Decrease in recurring net financial charges of €6.3 million vs. FY 2017, thanks to a reduction of average indebtedness and FX • Reduction in put option costs and others of €4.9 million vs. FY
Slide 45: Table of contents
Table of contents Results Summary Sales Results ‒ By region ‒ By brand Operating Results by Region Consolidated P&L Cash Flow & Net Financial Debt Conclusion & Outlook Annex 45 Full Year results ended 31 December 2018
Slide 46: Free cash flow
Free cash flow > Free cash flow at €235.6 million, up €8.5 million vs. FY 2017. Recurring free cash flow at €267.7 million, up €18.0 million vs. FY 2017. Key drivers: • Slight decrease of EBITDA adjusted of €(5.0) million • Tax paid of €48.5 million in FY 2018 after non-recurring tax benefits (‘Pate
Slide 47: Operating working capital
Operating working capital 25.5 (9.9) 36.7 €million 583.6 636.0 % on 33.3% (1) -30 bps +80 bps +330 bps 37.2% sales > OWC as % of net sales at 37.2% as of 31 December 2018, up from 33.3% (1) as of 31 December 2017, mainly due to the change of perimeter (+330 bps) > OWC increase of €52.4 million (2) a
Slide 48: CAPEX
CAPEX • Total capex investment of €70.9 million in FY 2018, net of the €4.4 million proceeds from real estate assets disposal. Excluding such effect, the capex investment was €75.3 million, of which: - €49.7 million maintenance capex - €25.6 million extraordinary capex • For FY 2019, maintenance cap
Slide 49: Net financial debt decreased by €135.3 million
Net financial debt decreased by €135.3 million € million 235.6 22.2 (57.5) (55.5) (9.5) (981.5) Total: €(100.3) million (846.3) (1) (2) > Net financial debt at €846.3 million as of 31 December 2018, down from €981.5 million as of 31 December 2017,thanks to the positive free cash flow generation of €
Slide 50: Debt maturity
Debt maturity > Net debt of €846.3 million as of 31 December 2018 > Long-term gross debt at €1.1 billion (1) - Overall long-term gross debt average coupon at 2.03% - Fixed interest rate debt accounts for c. 72% of the overall long-term gross debt (1) €219.1 million Eurobond expiring in October 2019
Slide 51: New accounting standard IFRS 16 - Leases
New accounting standard IFRS 16 - Leases (effective from fiscal year 2019) IFRS 16 - Leases as of fiscal year 2019 • Introducing a single lessee accounting model • Re-measurement of all material lease contracts to be recognized on the balance sheet: asset representing the right to use (to be depreci
Slide 52: Table of contents
Table of contents Results Summary Sales Results ‒ By region ‒ By brand Operating Results by Region Consolidated P&L Cash Flow & Net Financial Debt Conclusion & Outlook Annex 52 Full Year results ended 31 December 2018
Slide 53: Conclusion and Outlook
Conclusion and Outlook > Consistent delivery on strategy with a solid organic performance across all key profit indicators: robust organic topline growth in FY 2018 with continuous sales mix improvement driven by outperformance of key high-margin brands in core developed markets • On a reported basi
Slide 54: Table of contents
Table of contents Results Summary Sales Results ‒ By region ‒ By brand Operating Results by Region Consolidated P&L Cash Flow & Net Financial Debt New Developments Conclusion & Outlook Annex 54 Full Year results ended 31 December 2018
Slide 55: Annex contents
Annex - 1 Net sales by region and key market Annex - 2 FY 2018 consolidated income statement Annex - 3 Q4 2018 consolidated income statement Annex - 4 Reclassified balance sheet Annex - 5 Consolidated balance sheet Annex - 6 Reclassified cash flow Annex - 7 Cash flow statement Annex - 8 Financial de
Slide 56: Net sales by region & key market
Annex - 1 Net sales by region & key market Region breakdown by key market 56 Full Year results ended 31 December 2018
Slide 57: Net sales by region & key market
Annex - 1 Net sales by region & key market 57 Full Year results ended 31 December 2018
Slide 58: FY 2018 Consolidated income statement
Annex - 2 FY 2018 Consolidated income statement FY 2018 FY 2017 Change € million % € million % % (1) 1,711.7 100.0% 1,753.4 100.0% -2.4% Net sales (2) COGS (683.6) -39.9% (741.1) -42.3% -7.7% Gross profit 1,028.1 60.1% 1,012.3 57.7% 1.6% Advertising and promotion (289.2) -16.9% (279.9) -16.0% 3.3% C
Slide 59: Q4 2018 Consolidated income statement
Annex - 3 Q4 2018 Consolidated income statement 59 Full Year results ended 31 December 2018
Slide 60: Reclassified balance sheet
Annex - 4 Reclassified balance sheet Invested capital and resources 60 Full Year results ended 31 December 2018
Slide 61: Consolidated balance sheet (1 of 2)
Annex - 5 Consolidated balance sheet (1 of 2) Assets 61 Full Year results ended 31 December 2018
Slide 62: Consolidated balance sheet (2 of 2)
Annex - 5 Consolidated balance sheet (2 of 2) Liabilities 62 Full Year results ended 31 December 2018
Slide 63: Reclassified cash flow statement
Annex - 6 Reclassified cash flow statement 63 Full Year results ended 31 December 2018
Slide 64: Cash flow statement (1 of 2)
Annex - 7 Cash flow statement (1 of 2) 64 Full Year results ended 31 December 2018
Slide 65: Cash flow statement (2 of 2)
Annex - 7 Cash flow statement (2 of 2) 65 Full Year results ended 31 December 2018
Slide 66: Financial debt details
Annex - 8 Financial debt details Gross debt composition as of 31 December 2018 Net financial debt composition as of 31 December 2018 (1) Reclassified as short-term debt (2) Including commitments for future minority purchases (including Grand Marnier) and payable for future earn-outs 66 Full Year res
Slide 67: Operating working capital
Annex - 9 Operating working capital 67 Full Year results ended 31 December 2018
Slide 68: Exchange rates effects
Annex - 10 Exchange rates effects (1) (1) Following the adoption of IAS 29 ‘Financial reporting Hyperinflationary economies’ in Argentina, the average exchange rate of Argentine Peso for FY 2018 was adjusted to be equal to the rate as of 31 December 2018 68 Full Year results ended 31 December 2018
Slide 69: Disclaimer
Disclaimer This document contains forward-looking statements that relate to future events and future operating, economic and financial results of Campari Group. By their nature, forward-looking statements involve risk and uncertainty because they depend on the occurrence of future events and circums
Slide 70: EIR
TE = 1 EIR