Davide Campari-Milano (Milan:CPR) Q2 2026 Earnings Call

0:00 Good evening. This is the Chorus Call conference operator. Welcome and thank you for joining the Campari Group First Half twenty twenty six Financial Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. Today's call will be hosted by Simon Hunt, Chief Executive Officer and Francesco Mele, Chief Financial Officer.

0:32 At this time, I would like to turn the conference over to Simon Hunt. Please go ahead. Great. Thanks very much. Good afternoon, everyone. A pleasure to be here with you again. I've got Francesco with me and of course, we have our IR team who will be available after the call for any follow-up. So let's get going with a summary of our first half results. Now I think it's important to start by stating that we are doing exactly what we said we would do, and we are growing in the important start to the peak season. In fact, we are the only listed spirits player now with five consecutive quarters of organic top line growth. Now overall in H1, we recorded plus 2.7% organic top line growth with Q2 at plus 2.5% despite a more difficult comparison base.

1:22 At the same time, we continue to outperform and gain share across all of our key markets in sellout, especially on our priority brands. In fact, we are gaining share in 95% of our markets. Now I know you've all heard this a few times, but I think it's worth to reiterate our strategy that we shared at our CMD back in November, because that is exactly what we are doing. So first, we talked about sharper portfolio choices with fewer, bigger bets. We're doubling down on the key priority brands, and the results on the sellout are clear with solid share gains across regions and especially in the strategic on premise. Second, winning the first shared drink every day, everywhere, with new formats for new occasions.

2:11 Following our recent new format launches on our aperitifs, we are seeing very strong initial results, with positive feedback from consumers and trade and encouraging velocity and distribution gains. Third, accelerating our geographic expansion. In the first half, we recorded broad based growth with expansion into smaller Seating markets by increasing our exposure to these high growth markets where we under index, and also with the rollout of priority brands into new markets like Sassy Rosa in The U. S. Right in time for the summer season. And the final two, leveraging our investments to work harder and driving efficiency across each line of the P and L, allowing us to invest more behind our brands.

2:57 Now as you can see on the page, we strengthened our gross margin profile by 130 bps accretion, mainly driven by positive mix due to the performance of aperitifs as well as input cost benefit and lower tariff impact, and Francesco is going to go into that in a lot more detail later on. Our brand building investments continued at pace into the peak season and front loaded in the first half in absolute terms as we guided. In fact, we are deploying one of the most comprehensive coverages across music festivals and other events, both with our existing products as well as our new innovations this year. Our cost containment program continues to deliver, and we are on track to achieve 70 bps organic SG and A benefit on top line as guided, with an H1 delivery of 60 bps.

3:48 As a result, we achieved 130 bps EBIT adjusted margin accretion. Although the underlying trends on the main contributors to EBIT have not changed, we are raising our margin expectation for the full year due to a more favorable than expected tariff impact. Again, more details on this later in the presentation. On the balance sheet side, we remain comfortable and at sustainable levels. We recorded 64% recurring free cash flow conversion before operating working capital changes, and total recurring conversion was impacted by seasonality. Our distillery expansion in Kentucky is progressing as planned and on track to be finalized by the end of the year. Our leverage is comfortable at 2.6 times, supported by business momentum with some impact of seasonality in operating working capital.

4:43 At the same time, we are continuing to streamline our portfolio with new disposals of the Rum Agricole business, including Toire Riviere, Maison La Monie as well as Biscay du Boucher and Cabo Wabo. As I'm sure you will have seen, we also recently successfully closed a new Eurobond issuance of €600,000,000 and a liability management transaction, which allow us to feel comfortable regarding the maturity profile of our funding base. So now let's delve into some of the details, starting with the top line. As you can see, the first half organic top line growth of plus 2.7% was broad based across all regions and most houses again. In terms of FX, the main impact is coming from the U. S. Dollar, while the perimeter impact is in line with what we previously told you and mainly driven by the disposal of Cinzano and one month impact of Averna.

5:40 We'll go one by one, but first, let's look at sellout, which, as you know, is the critical indicator. So far in '26, year to date, we have recorded outperformance and share gains across all of our key markets. With our priority brands, we are growing everywhere, in most cases with mid single to low double digit growth. In The U. S, we are outperforming in all channels, especially in NAPCO and the strategic on premise, where the share gains are even more evident. In Europe, again, we have an outperformance across the board. Total Europe sellout data includes 12 countries, and you can see we are growing plus 2% compared to the sector decline of negative 1%. And in the on premise, which you don't see on the page, the outperformance is even more pronounced.

6:28 Now as I stated upfront, we are gaining share in every one of our markets, and I think with all the noise in the category on CEO changes and significant restructures, merger speculation and consumer pressure, we at Campari are growing, and we are growing share because we have a clear, differentiated strategy, and we are executing it without distractions. So now let's move on to Europe top line. Europe delivered plus 1.9% organic growth in the first half, with growth across all markets except Germany. In fact, Europe growth is plus 2.9%, excluding Germany, where the consumer pressure is most evident. This growth was driven by our Perotiv portfolio strategy with contribution from all of our key brands.

7:16 Innovations also started playing a more meaningful role as part of our convenience strategy. And altogether, we are implementing the biggest biggest ever activation plan in Europe in terms of days of activation, menu placements and festivals. In Italy, we saw continued growth for our peritif portfolio, led by strong executions on innovations, notably Aperol on Tap and Campari Spritz Ready to Serve, which hit shelves at the beginning of Q2. In addition, we are executing 4,700 activations during the peak season, especially into Q3, and we already have Aperol Tap in more than 1,000 outlets, including festivals, events, but also new outlets like pizza restaurants.

8:04 Aperol's performance was further supported by the rollout of our L'Origineale campaign, which is reinforcing our leadership in the entree with almost 500 outlets already proudly displaying the certification badge that they proudly serve Aperol. As I mentioned, Germany continues to see a challenging backdrop with subdued consumer confidence and wallet pressure impacting numerous consumer sectors. Now despite this backdrop, Sassy Rosa's performance remains strong, and we've seen strong execution behind Cardino and the early success of our innovation rollout, including Campari Spritz ready to serve and Aperol on tap. The environment going forward is expected to continue to be challenging, but we will continue to expand our presence and activate behind our key brands in preparation of the market recovery.

8:58 In France, the aperitif portfolio is performing strongly with high single digit growth, partially offset by the local portfolio. Aperol continues to lead that performance, and Saffirosa has also started to gain traction following its launch last year. The UK had a strong first half with plus 4.3% growth, once again led by double digit growth in our aperitif portfolio with contribution from Aperol, Campari, Sartirosa and Credino. There's also strong early traction for the Aperol2Go can, with ongoing distribution gains and velocity at three times our original targets. At the BST Festival in Hyde Park over a two week period, we sold 65,000 cans of Aperol Spritz in a format that we wouldn't have been able to do previously, and Aperol ONTAP will also progressively be rolled out over the summer.

9:56 In other European markets, where it was only about 12% of overall sales, we saw broad based growth of plus 5.5% across most countries, especially in Spain, Austria, Greece and Benelux. Having just been to both Spain and Greece, I can tell you the potential for our portfolio there is really exciting, and the bulk of the growth is coming from Aperol, Sartirosa, Crudino and sparkling wine to support the aperitif trend as well as solid performance on Courvoisier. Now moving to North America. We recorded a plus 2.6% organic growth with all markets growing. The U. S. Recorded a plus 1.5% organic growth, driven by our priority brands Aperol and Espolon, especially with strong entree performances.

10:45 Aperol saw solid growth, showing the early benefits of increased investments behind the brand, including an amplified presence at Coachella and the 21 new brand activators in the on premise across the four states are really driving the business. In fact, the accounts that they are covering, we are seeing four times the velocity of the accounts that they are not covering. In July, we started a campaign with Hilary Duff to sponsor her concert tour, which is further amplifying visibility into the third quarter. Another important development in The U. S. Is the June launch of Sarti Rosa. Although it's very early days, we are seeing strong pickup with most locations limiting consumers to a maximum of a one or two bottle purchase, and we're already seeing people come back for reorders.

11:36 TikTok is leading the social media buzz on this brand, accounting for 41% of the coverage, which is an encouraging signal that the brand is resonating with legal purchase age trend driven consumers. S1 also continues to perform well with high single digit growth, both in Blanco and Repo. Also here, we continue to activate behind the brand with the short King Week campaign featuring Ken Jeong and activations during the World Cup with a series of watching block parties. Commercially, we placed Esplanade in over 7,000 menus, double our original target, with similar success also in off premise displays. And we'll talk more about the performance later in the day.

12:23 Moving to Jamaica, we recorded plus 8.8% growth with benefit from the faster hurricane recovery as well as pricing coming through in the market. For the rest of the region, all countries registered solid growth, including Mexico, which recovered the quarter one phasing impact that we mentioned previously. Now let's have a look at the developing markets. As a reminder, we formed this region at the beginning of the year in order to become more agile and benefit from repeatable playbook across some of our seeding markets.

12:54 In the first half, we started to see some of the benefits of this increased focus with widespread organic growth of plus 9.1%. Brazil saw continued momentum of Aperol and local brands, partially offset Campari phasing into the next quarter. Argentina benefited from the ongoing strength of Sky Cosmic. And since the launch of Sky Cosmic was in June last year, we do expect the growth rate to normalize in the second half. In the other countries, one of the key drivers of growth was Courvoisier, led by Eastern Europe and South Africa. The new region has completed its strategy work and is now working on capital allocation in line with the group wide strategy in a disciplined way to target the multiple opportunities we have in these markets.

13:43 For APAC and GCR, we registered a flat trend in the first half. The biggest market, Australia, grew plus 2.6% with double digit growth in both Aperol and Espolon to now contributing about onethree of the total top line in Australia. And this was partially offset with a flattish trend on Wild Turkey, which still contributes more than 50% of Australia's top line. Here, we're continuing our focus in the on premise and activating strongly. In GTR, we recorded a plus 6% growth. As you might remember, in Q1, it was negative 13.5%. It was off a high base admittedly, but it was also impacted by geopolitical events in certain geographies. In Q2, while an easier comparison base helped, we also focused strongly on the imperatives in Europe.

14:31 And below, you can see our launch in EasyJet and British Airways of the Aperol to Go Cannes, for example, while also activating across numerous airports. In the rest of the region, we recorded solid growth in China, India and other partnership markets, but this was more than offset by South Korea, where the completion of our distribution company integration has led to a negative impact this year. Right, now let's change the optics from regions to houses, starting with aperitifs. Overall top line growth was an encouraging plus 4% in the first half. Aperol delivered a solid performance of plus 3.3%, benefiting from a positive trend in the bottle, which was amplified by launch of innovations such as Aperol on tap.

15:19 All regions contributed to the positive trend, and we'll talk more about the Aperol innovations on the next slide. Italy saw a resilient performance, while in Germany, the brand was held back by the challenging consumer environment. Else where, we saw good contribution from The U. S, UK, France, Brazil and Australia.

15:38 For Campari, we reported plus 2.3% growth, with solid performance in Europe and North America. And Campari also benefited from the launch of Campari Spritz ready to serve in Q2 in some European markets. It's early days, but so far the response from the trade in consumers has been very positive, particularly in Italy and Germany. The remainder of our aperitifs portfolio grew 8.8%, primarily driven by Sartirosa, which continues its solid growth in its core German market and is also progressively benefiting from the rollout into other high potential countries. It's important to note that only a few years ago in 2023, only 4% of Sartirosa top line was outside of Germany.

16:25 This has now reached 48%, showing the solid reception that it's having in new markets.

16:32 As I mentioned before, The U. S. Launch is now underway, and the initial trends are very positive. In The UK, it has already become the number one innovation launch in spirits in Sainsbury's in just a short few months.

16:47 Now one of the key pillars on our CMD was winning the first shared drink with new formats for new occasions and providing convenient options for our consumers. And here I want to walk you through what we've launched so far for Aperol. Of course, the bottle and the perfect serve remain a critical piece of our strategy, and the on premise focus remains fundamental in order to reach new occasions and achieve incremental growth. We've accelerated the expansion of the ready to serve into new markets.

17:16 Now we have 15 seating markets, and the trends are all positive, and this allows consumers to achieve that perfect serve at home in a glass over ice. As you all know, we piloted Aperol on TAP last year over the summer in select locations. This year, we are rolling it out across the peak season in more and more high velocity venues and events in select markets. The TAP program allows us to use events not solely for visibility but also for sales.

17:48 In just three months, the TAP volume in Italy has reached roughly 1.5% market share of premium beer. This is exactly the profit pool we want to penetrate further.

18:02 Lastly, we also launched the long awaited Aperol2Go can in The UK, Belgium, Austria and GTR. The idea is simple, making Aperol accessible in occasions where we're not able to play in the past. Towards the end of the year, we're also planning to launch a glass to go alternative for some select markets like Brazil, which similarly to TAP can be an on premise alternative to offset local constraints like the lack of Prosecco in Brazil.

18:31 Now all of these innovations give us incremental top line and higher or on par gross profit per serve versus the three:two:one. Now moving on to the House of Whiskey and Rum, we recorded a decline of 6%, mainly due to the impact of the whiskey category challenges in The U. S, South Korean impact that I already mentioned, and a temporary demand led supply constraint on Russell's reserve, as I've told you before. And going forward, supply will be strategically managed in the upcoming years to ensure that we have a more consistent aging liquid supply.

19:06 Jamaican rums were resilient with flattish top line, including solid underlying trends in Jamaica, offset by a high comparison base in The U. S. In the House of Agave, Espelon grew 8.2% in the first half with balanced growth in both Blanco and Repo, supported by the launch of Extra Inejo. Here, while we see the ongoing benefit from geographic expansion, the majority of the growth is being driven by the core U. S, where the brand continues to gain share. On the next page, you're going to see some additional details on

19:43 First, looking back at the performance of Espolon in The U. S. Over the last ten years on the top left chart, you can see what a trajectory it's had. Clearly, there's been a lot of growth in tequila overall, but both in the initial period of growth between 2015 and 2022 as well as the most recent period, Efelon has outperformed strongly.

20:02 The premium segment is currently the fastest growing part of the category as many consumers trade down from the larger super premium segment. And Esplan's quality led premium positioning benefits us from both trading up and trading down. S1 in 2015 was the fourth largest premium brand in The U. S. And now as of 2025, it is the number two, with a CAGR growth of plus 19% between 2022 and 2025.

20:33 Now looking instead to the year to date sellout data in 2026 in the bottom left, we see this trend continuing. In the Nielsen off prem, Esplanade is one of only four growing top 10 brands. In fact, across the four largest tequila states, Esplanade is outperforming by nine points on average, including key battlegrounds of California, Texas, Florida and New York.

20:59 In Nashville, we have gained plus 70 bps market share and are the only top 10 growing brand with a plus 12% growth. Similarly, the on premise, we are again the only double digit scale brand in the category, and we plan to continue this trend with investments behind the brand, selective promotions, but keeping our pricing strategy, which we believe the great liquid supports the strong value equation for the consumer.

21:28 And lastly, looking at the right part of the page, you can see we also have ample incremental room for growth. Smaller pack formats are the main growing part of the tequila category today in The U. S, with plus 3% growth in smaller than three seventy five ml versus negative four for the overall category year to date. We launched our smallest format to date, which is a 200 ml bottle, only in June this year. It's already seen a strong pickup, and we expect more contribution going forward with potential additional innovations to come in this segment of the market.

22:02 Ferruin innovation will also drive additional growth. The Extra Anejo launch in June at $70 per bottle, for example, cements the brand's accessible premium sales with one of the most affordable and frankly delicious extra Nejo offerings on the market.

22:20 Finally, we can have a look at our House of Cognac and Champagne and then the local brands. The House of Cognac and Champagne recorded a plus 4.6% top line growth, with solid performance in Courvoisier driven by developing markets and APAC. In The U. S, we held a stable trend despite the ongoing category pressure. The growth in Dramani, on the other hand, was mainly due to an easy comp base with normalization expected in the balance of the year.

22:48 Within our local brands, Sky remains an important part of our portfolio, and we're pleased to see the growth of plus 5.7% in the first half, primarily driven by Argentina due to the popularity of Sky Cosmic, and that was more than offsetting the ongoing softness in The U. S, in line with other major players in The U. S. Vodka category.

23:09 I'll now hand the floor over to Francesco, who will walk you through the first half financials in more detail. Francesco? Thank you, Simon, and good afternoon to you all. Let's start by looking at the EBIT margin trends.

23:23 Overall, in H1, we recorded 130 bps organic EBIT adjusted margin expansion, supported by the pull forward of gross margin benefit, while A and P and SG and A are progressing as planned. In gross margin, we recorded a solid organic accretion of 130 bps, supported by a combination of stronger mix effect due to the solid performance of aperitib in early peak season, the phasing of cost productivity gains, which we were able to realize faster than originally expected and now in the base, the tail end of agave benefit that we have flagged previously,

24:03 and lastly, limited tariff impact of $7,000,000 Here, the impact was lower than we originally expected for H1 due to the fact that between February 2020 until the end of the quarter, we paid only 10% tariff in The U. S. Instead of the originally expected 15%.

24:23 As a result, we have updated our full year guidance accordingly. Based on the U. S. Administration most recent decision of just a few days ago, the 10% tariff was for the time being reconfirmed. We will obviously keep monitoring the development around tariffs. Our A and P to sales reached 17.4% in H1, leading to a dilutive impact of 50 bps organic, driven by brand building investment for peak season and to support our innovation pipeline as planned. On SG and A, our containment efforts are continuing, in line with our expectation, and we benefited from an accretive impact of 60 bps organic in H1.

25:08 This means that we are on track to reach by the end of twenty twenty six the 70 bps guidance that we have provided.

25:17 Some of you might have seen that Helena and Fossil have recently joined us as CHRO and brings with her significant large scale transformation and automation capabilities. To close, EBIT adjusted will arrive at $358,000,000 reflecting a margin of 23.7% with plus 8.5% organic growth, excluding the net negative impact of 23,000,000 from perimeter and FX.

25:47 In terms of P and L, we recorded a positive evolution supported by business momentum. Group net profit adjusted grew at 4.7%, mainly driven by the positive evolution of EBIT adjusted as well as favorable impact of financial expenses. EBIT operating adjustments were negative at $2.00 9,000,000 mainly driven by the write down of assets marked for disposal of $82,000,000 as we recognize the diminished strategic value for these route to market announcing past acquisition, and we'll have to their asset value as we dispose of them.

26:26 Simon will comment more on this new disposal later in the presentation. Negative $70,000,000 related to other fixed assets, negative $10,000,000 related to bread impairments and finally, $19,000,000 coming from the Averna and Zazzapira disposal capital gain.

26:46 Adjusted financial expenses were 44,000,000 with decrease driven by lower average net debt at $2,000,000,000 versus $2,300,000,000 last year, with average cost of net debt stable at 4.3%. The positive $5,000,000 adjustment you see in the table is related to the gain we booked due to the bond liability management executed in the context of the $600,000,000 bond issuance. For the full year, we are maintaining our guidance of around $100,000,000 financial expenses,

27:18 also due to the impact of the new bond issuance, which has further helped improving our maturity profile. The recurring tax rate was at 27.9%, minus 130 bps versus H1 2025 due to favorable country mix. Recurring cash tax rate is at 25.8%. Lastly, I will cover the key balance sheet indicator on the next page. Operating working capital as a percentage of sales is at 52%, similar to the same period of last year and seasonally higher mainly due to some buildup of finished good inventory for peak season and select increase in maturing liquid.

28:05 Compared to the end of the year, the increase in operating working capital is also due to the normalization in the net trade position, driven by concentration of CapEx and related cumulated payable at the end of last year. On CapEx, the maintenance CapEx remained temporarily contained at three percent of sales, slightly below the run rate of around 4%.

28:31 Extraordinary CapEx, on the other hand, is at 2% of sales, including the tail of the production capacity enhancement program, especially in Kentucky, with finalization expected in 2026 for a total offer of 100,000,000 On cash flow, the recurring free cash flow before operating working capital change conversion is at 64%, in line with our historical five year average of 68%.

29:00 The overall recurring free cash flow, on the other hand, remained more limited at 4% conversion or $19,000,000 due to the impact of the operating working capital seasonality. This is expected to normalize into the second half of the year. On leverage, we remain comfortable at 2.6 times, marginally higher than year end leverage ratio due to some impact of the seasonality that I mentioned before. In fact, the increase of $110,000,000 in net debt is primarily linked to this operating working capital increase as well as some impact from the dividend payment, mitigated by the proceeds of the Averna disposal.

29:43 And with that, I will hand back to Simon to talk about certain activity in 2026 and our outlook. Thank you. Great. Thanks, Francesca. Look, you've all seen this page before, which is a summary of what we plan for 2026, and the reason I put it up, it's exactly what we are doing. I won't go one by one as we've already covered the majority of these points, but it's important to note that all of these points are on track and will remain so for the balance of the year. So now just coming back to our portfolio streamlining. We want to give you an update on what's been keeping Fabio de Fede so busy over the last twelve months. And with this release, we are happy to announce that we have closed another two disposals that you see on this page, which might be limited in terms of size, but have a clear and solid rationale.

30:29 The first is Rung Agriquel business, including Toire Riviere, Maison La Monin and the second is the disposal of Cabo Wabo tequila and Biscuit de Boucher cognac business. Now in the past, we needed these brands to open up new markets, but this is no longer the case. For example, the rum agricole portfolio was acquired to support the route to market in France. At the same time, they're margin dilutive, cash intensive and with very limited upside to growth within our portfolio.

30:59 So together with the previously announced deals that you can see on this page, we have already made significant headway over the last eighteen months in this regard, with the disposal of more than 10 brands or businesses. By the end of twenty twenty six, we are planning on coming to the end of our portfolio streamlining, which significantly reduces the complexity in the business, and allows us to concentrate resources, investment and management focus behind our fewer bigger bets, and this is absolutely consistent with our capital allocation discipline.

31:33 Now moving on to our outlook for the rest of the year. As you can see, we have an update on our guidance. Starting with the top line, we are confirming the full year guidance of circa 3% organic growth. On the EBIT adjusted margin, we now foresee an incremental uplift, and this is due to the more favorable tariff environment, which means we can expect a €10,000,000 benefit flowing through to the bottom line compared to our previous guidance. Accordingly, the full year negative tariff impact we now expect is around €20,000,000 instead of €30,000,000 Considering the positive phasing into the first half, second half EBIT adjusted margin therefore will be relatively flattish versus the same period of the previous year in organic terms.

32:24 All other contributors to the margin remain unchanged. This means that the underlying gross margin trend where we recorded phasing into the first half is not altered in our full year expectation. Now as I'm sure you've heard from many companies, the claims on the potential 2025 tariff refund have started, and we've also made a claim and recorded a €15,000,000 as a contingent asset. However, given that the timing and extent of the refund remains uncertain at this stage and we see additional potential geopolitical volatility impacting COGS in the second half, primarily from things like logistics, we believe that these two effects might reasonably offset each other with no incremental benefit for the full year. Now to be clear, if we do see a benefit of that, we will update the guidance when we give you an update on Q3.

33:16 But at this stage, we don't want to count on anything given the volatility around tariffs, payments and the geopolitical environment we're operating in. On A and P and SG and A, we confirm our previous guidance as we invest confidently behind the long term development of the business. So overall, we're encouraged by the progress we made in the first half, and we continue to remain fully focused on executing the strategy we presented at our Capital Markets Day, with positive traction across our priority brands and geographies for five quarters now. For us, the keyword going forward is execute, execute, execute. And we're now happy to open up the floor for any questions you have. Thank you. Thank you. This is the Chorus Call conference operator.

34:03 We will now begin the question and answer session. The first question is from Sanjit Awila, UBS. Hey, Simon, Francesco. A couple of questions from me, please. Firstly, on The U. S. Simon, can you just clarify if there were any further inventory adjustments into Q2? And how are you seeing the pricing environment evolve across your categories in recent months? And then just double clicking on that, fully appreciate the positives in the portfolio, there are a couple of drags, in particular Grand Marnier and Wild Turkey. What are you doing to try and stabilize those brands in the portfolio, please? I've got a second question after that, but maybe we can kick off with The US.

35:06 Benjie, I've got three questions on that first one, so let me see how we go with those. So, Look, I think in terms of the inventory adjustment in Q2, business as usual, no extraordinary movements on inventory, full stop. The second one was on pricing in terms of someone's reading the question Categories in recent months, yes, look, think we continue to see people getting a bit more aggressive as the trends remain challenged. I think in certain categories, we're seeing it more than others. I know there's a huge degree of speculation about what's happening in tequila. At this stage, we're not seeing the read across in terms of really impacting our performance on Espelon. As I've said to you before, we believe we've got the right price strategy with Espelon. We're well positioned in the consumer's eyes and the trade's eyes as a good quality tequila with a good value proposition.

35:52 And so I think, look, we're going to have to wait and see. There's a lot of speculation as to what might happen in the next couple of weeks in terms of new strategies. We're confident in what we're doing. We're price promoting in the way that we would normally do around the key seasons, but let's wait and see. As we've said before, pricing is always relative, but we don't see a big read across between potential movements of brands above us impacting the business. Last one, I think, was Grammoney and Wild Turkey. I think what's interesting on Grand Marnier is and I'm sure you've seen this in some of the data and heard it from other people, we're seeing the traffic numbers in The U. S. Starting to come back, but what we're seeing is the tickets aren't following at quite the same velocity yet. I think where we see the opportunities with things like the Grand Margherita, as people are going out again. If they are going out, they want to trade up.

36:38 I think we can continue to leverage that trend on Grand Marnier and take advantage of people getting back into the on trade. I think on wild turkey, look, it's a tough category. You've seen it in a number of the reports from other companies. I think we've been rebasing our strategy. We've been looking at what other opportunities we have to work with it. We've got new innovations that we're looking at in ready to drink in Australia to keep things moving forward. But look, it's a tough category at the moment, and we've got to carve out our rightful share of it. That's really helpful color. My second one was really on Germany and just understanding the weakness there. To what extent is that a continuation of the retailer headwinds you had in Q1? Or is it just a weak category and you expect those trends to persist in page two?

37:26 Yes, that's a great question. Look, I think it is just a weak category. We've got no issue with the German retailers. We've managed to continue to work with the retailers across Europe. I think we're pleased with where everyone ended up this year. But I think if you look at the consumer data, you look at what's happening in terms of other consumer goods outside of our sector, the German consumer remains under significant pressure, and you see that very selective purchase power, And as a result, we've got to position ourselves the right way for when they do come back, and I think we're doing exactly that. Thank you. The next question is from Andrea Pistacchi, Bank of America. Yes, thank you. Hi, Simon and Ciao, Francisco. Two questions please on two aspects of your guidance.

38:15 So starting with the top line, just on the 3% in H1, so your guidance for the year, which is to confirm about 3% implies, I'd say something similar or a fraction more in H2. Now bearing in mind, the more difficult comparison base in H2, where do you see the incremental positives that will take you to close to three? And are you able to share any color maybe on how Q3 may have started? And for Francesco on margins, up 130 basis points in H1. I think Simon, there are a lot of moving parts in the margin, but I think you said flattish for H2. That's the way to think about it. Now the tariff benefit should be a positive in H1 and in H2.

39:04 Positive mix, I assume, should continue as you outperform with aperitifs. So where is the main offset that will hold back margins in H2 versus H1? Is it I mean, it's probably a bit less agave benefit, but maybe you can talk about the COGS pressures, the input cost situation along with this. Thank you. Chandra, okay. I mean, I think in terms of the top line question first, we're guiding on the full year at three. As you can see, we're pretty close to that for Q1, pretty close to Q2. We've a bit of work to do, but I think what we've got is we've got some good momentum coming through in terms of the brands. We're seeing very strong execution, particularly from Q2, and to answer your question, and into Q3.

39:50 I'm pleased with what I'm seeing in terms of the activations we've got across not only North America but also across Europe, which is giving us, I think, some strong momentum coming into Q3. I think from that point of view, that's really where we're seeing the difference between where we've got the first half and then landing the full year. But look, it's a competitive market. We've got some work to do, but that's our target and that's what we're going for. So Francesca, you want to take the Absolutely. In terms of margin, mean, you pointed out the key driver of the margin trend during the second part of the year. We still expect a positive COGS evolution, but to a lesser extent compared to H1. And to be fair, we actually feel that for the entire part of the period, the weight of the tariff on the other side. So we expect some accretion on the COGS side, but limited.

40:45 And clearly, the rest remain the same. We expect some pressure on price offset by mix. Mix remain positive as we see in H1. Andrew, I might just add one thing to that comment as well. I said in my closing comments, I think the key thing here is around the tariff, we've seen, I think it's fair to say, a fairly massive degree of volatility on how that has played out. And as a result, like any updates we have on that on refunds or anything else, we can pick up in Q3. But at this stage, we don't have that level of confidence yet. And I think we can continue to see what that looks like and update you accordingly. Maybe something I can add in terms of input costs. Actually still maintaining a good position on general input costs with the exception of logistics. Logistics clearly have increased already in the first half and keep increasing in Q3. And we expect the same to continue in Q4.

41:41 Perfect. Thank you. The next question is from Celine Panuti, JPMorgan. Thank you for taking my question. My first question is on Italy. You mentioned that well, can you talk a bit about the market? I understand from your chart on Slide four, I think market was up 1% on sellout. It seems to have decelerated in Q2. But what if you can talk about like those new tab you said is 1.5% of the beer market. What is it in terms of total apparel? And if you can talk about price points in that market and how you think there is further upside to grow in Italy? And then my second question is in The U. S.

42:38 Can you talk about the market environment? It seems on premise has stood. Are you seeing any change throughout the quarter in terms of maybe improvement at the end of the quarter or early July, if there's anything you can do? And overall, what is your assumption on The U. S. As you look at your guidance for the second half? Thank you. Sure. Hi, Sune. I think in terms of Italy, the important thing is when you look in comparison between the quarters is you got to remember the first quarter in Italy is significantly smaller than the second quarter. So there may be some movement there, which is driving your read of one point down. I think the key thing on this is if I reflect on the same conversation we had last year where the market was very negative, and the fact that we're now delivering as a group plus 5% and with the focused brands plus 4%, I think it really reflects the momentum that we've got. I think it's coming from a number of things, as I said. The first one is I think we're seeing extremely strong execution this year with over 4,700 activations across Italy.

43:48 That's a massive amount and a real step forward for the brand. We increased the investment, and we've also, as I said, we've increased the formats. So certainly we're starting to broaden what is already a very established ritual in Italy into new occasions we couldn't get in before. If I just use the example of one of the festivals we went to, which was the Bad Bunny concert at San Siro recently. Previously, we would have sold zero Aperol Spritz. By having it on tap, we sold 22,000 Aperol Spritz in one night, so a very dynamic legal purchase age crowd. So I think what we're seeing there is a broadening of the occasionality through the formats, and I think just momentum in terms of getting the brand back on track in its own market. So I think for that first point, I think that answers that. I think the second one is, let's see, any changes you've seen in any kind of quarterly dates, take on your guidance for the second half? Yes, think, look, as we said in our overall guidance, look, it still remains quite a tricky market. And you look at all the same data we do, I think the key thing where we have points of difference is on the brands we're focusing on and where we're building them, both in NABCA and also in the on premise, we are significantly outperforming the market. I think it's a balance between a very positive story on those priority brands, balanced also with the broader portfolio that don't have the same level of focus behind them.

45:07 And as a result, that's why on the full year guidance, I think we're being quite sensible in terms of balancing those two sides of the portfolio out. Can I just have a follow-up on the previous question? And you know your gross margin saying that the beating H1 doesn't change the outcome for the year. So if I understand correctly, it's a a question of the phasing of the productivity savings and maybe as well phasing of the cost benefit and maybe against cost impact in the second half. I just want to understand on the mix because you mentioned that as a positive impact. And the fact that you mentioned a good start to the year is potentially a good summer incremental to your flat margin or, let's say, gross margin guidance for the year?

46:01 Yes. Celine, for sure, it's a phasing on the COGS side, so we can confirm that. In terms of mix, mix is still positive also in the second part of the year. It's driven by the aperitif growing faster. But then the rest is clearly affecting more when it comes to price. We feel more pressure in terms of price. So the net net, the impact in terms of margin is lower compared to H1. Thank you. The next question is from Simon Hales, Citi. Thank you. Good evening all. So two for me as well. I wonder, Simon, if we could just come back to your comments around how Q3 has started.

46:48 I hate to ask about the weather and maybe building on Celine's sort of comments there. Clearly, we've had good weather in Europe through the back end of June and into July. Is that supportive to your business in all of your markets? Or is it being problematic in some regions? Has it been too hot for people to go out, I suppose, is my own underlying question because I think there was some fear that that's what we might see on the terraces in Italy. Is that something that you've seen? And then secondly, with regards to the recently announced brand disposals, are you able to help us in terms of how we should think about the impact of those disposals on earnings in 2027? You've given us the rough proceeds number of around €30,000,000 How do we think about what the contribution of those brands from a sales and EBIT standpoint is at the moment?

47:41 Sure. Hi, Simon. Yes, look, think in terms of Q3, think it's one of these I mean, the way we run the business is, look, we hope for good weather, but we don't count on it, is the way we look at it, and that's why we've increased the number of activations and putting it out. I think actually I haven't got the days in front of but from memory, I think actually the number of sunny days across European capital has been reasonably similar year on year. So I don't think it's been a big driver. I think what's been a more positive driver was our execution and what we're doing in terms of getting out for trade and getting into new occasions. So I think from that point of view, I think, look, it's better if the sun's shining, of course, but we're not relying on it. I think on the second part, on the disposals, the overall impact we talked about coming through, don't know, Francesca, you want to take this one or do want me to? Yes. No, no, let me take it. If you look at 2026, we have indicated a perimeter impact of $70,000,000 in sales and $30,000,000 in terms of EBIT.

48:35 You need to consider that Cinsano is impacting for eleven months and Avera is impacting for seven months. So all in all, when you look at the entire asset that we disposed, the, let's say, pro form a revenue were about €130,000,000 including Cinzana, Averna, all direct. I mean the last bid, the last transaction are for about $40,000,000 in total. So the other were 90,000,000 and so the additional is coming for a much, much smaller number. When it comes to Cinzano N. V. Irma, they had a positive EBIT contribution. But when it comes to the last disposal, they had a very, very negligible contribution in terms of EBIT. So they are EBIT accretive in terms of and I would say they are also gross margin accretive and EBIT accretive.

49:29 So you need to look at this portal in a very different way. These are assets that were more difficult, we are not generating grow and we are not generating gross margin. Got it. Thanks very much. The next question is from Trevor Stirling, Bernstein. Yes. Hi, Simon. Hi, Francesco. Two questions from my side. Simon, concerning A and P, A and P could be up in the first half. But I think from memory, you said that that increase in A and P would probably be first half weighted behind the activation. So given the momentum in the business, I wouldn't be surprised if you're going to throw a bit more A and P into the second half as well. But any more any guidance on that would be welcome. And the second thing, question for Francesco around the extraordinary CapEx.

50:16 I think buried in the back of the presentation, a chart that says that was $34,000,000 in the first half, so implicitly stepping up to 66,000,000 in the second half. And I wonder if could just explain why the CapEx is second half weighted on the extraordinary CapEx. Hi, Trevor. Yeah, look, on the A and P, as we guided, look, we always have a bit of a weighting into the second quarter as we get ready for the peak season, but of course there's a balance between that as we go. Look, we don't just have one peak season. Runs Q2, Q3. So actually there's a balance between first half and second half. Clearly, we see the opportunity to invest more behind the brands, as I've said before in the C and D, I really think now is the time you invest. When everyone is pulling back and kind of making short term decisions, we're investing for the long term. So if the top line is there, we'll be reinvesting behind that. One of the good examples of that would probably be Sati, where we see some outperformance and we are maintaining a healthy reinvestment rate to build a brand for the long term.

51:16 Francesco, do you want take the second one? You actually pointed out, we actually confirm around 8% of CapEx over net sales for the entire year. There are a number of items that have been moved to the second part. There is for sure the headquarter where we are progressing, but the vast majority of the work are taking place now because the first part was more foundation and we are completing the Kentucky. That is the part that is attracting most of the CapEx in the second part. All in all, we are going to have, let's say, maintenance CapEx, let's say, of around 4%, a bit more and extraordinary CapEx a bit less than 4%. All in all, slightly below 8% and we can confirm that.

52:05 And Trevor, as you know, just practically on this, you don't normally pay up all of it until you know it's working. We're heading out to Kentucky in about four weeks' time to make sure it's there. The next question is from Laurence Wyatt, Barclays. Hi, Simon and Francesco. Thanks very much for the questions. A couple from me. Firstly, on your you've now got your 21 brand activators been in The U. S. Market for about six months. You sort of mentioned that they were performing particularly well. But I was wondering if there's anything that's appeared from the last six months that perhaps was unexpected or any other way that you think they've done better than you thought or any issues in them being in the market you didn't expect?

52:54 And perhaps I assume the majority of the impact has been in the on trade, but wondering if they had any further impact on any off trade sales as well. And then secondly, was just wondering on Espolon, just wondering if there was anything inherent to the brand that's driving the better performance in other tequilas in the market. You sort of talked about the execution that you're doing, but wondering if there was anything unique to the brand that is helping it, particularly whether the additive free status was do you think was really driving any of those sales? Thank you. Hi, Laurence. Look, think in terms of the 21 brand activators, as we said, look, they to give you an idea, they look after between 75 to 100 accounts depending on which state they're in and the geographies they're in.

53:45 I think in answer to your question, not really unexpected. I mean, that's the reason we put them in is we were anticipating that there would be a positive impact on Velocity, which is exactly what we're seeing in the on premise. So I think there are two parts to that that are not really unexpected, but I think beneficial. It's difficult to quantify from a model point of view. One is at the moment, a lot of companies are pulling back on their trade support, and we're not. I think the trade is recognizing that and very much welcoming it, given the fact they're under quite a lot of pressure as well. That's the first part. The second part is Campari has always had a very strong on trade relationship with bartenders through the Campari Academy, through the activations and things like that. So I think from that point of view, I think that definitely helps in terms of reinforcing what makes us a bit different with the trade and with customers.

54:31 There is a knock on effect. We think by investing in the on trade, we think we do see some uplift in terms of off trade that is nearby, and that's a model that we've seen work several times, but there's less direct calling into the off trade of that group. They're predominantly an on premise focused team. I think in terms of Esplanade, a few things going on there. There's been a lot of speculation for the last six months that suddenly it's going to be this massive price war and various other things going on in the category. The key thing that we've been doing is really just focusing on what we do well, and we've been building the distribution. We've been getting the menu placements. As I said, we ended up targeting twice as many menus as we'd originally set out. We've got significantly more displays heading through Cinco de Mayo. We've got good trade support behind the brand. Bartenders love serving Espelem. We know that. There's a real momentum there, and that's not stuff that you can build in a couple of weeks. That's stuff that's been built over the last ten, fifteen years. I think that's really where we're seeing the benefit. I think the other part is just practically on the liquid. It's really good tequila and at a fair price, and I think both the trade and the consumers see that. There's nothing on additive free status.

55:40 There's nothing that we focus on, on that. We focus on just really good tequila, fair price, well represented by bartenders because they like working with us and they love the irreverence side of the brand. As we talked about before, things like the cocktail fights is something that no one else does with them. It's fun, it's engaging, and it kind of puts a bit of fun at how serious the rest of the world is on this. It's a fun brand, and I think Bill will feel that. That's really helpful, Simon. Thank you very much. The next question is from Olivier Nicolai, Goldman Sachs. Hi, good evening, Simon, Francesco and Gurus, Simon. I've got two questions. First, on RTDs. You had good feedback in the European markets where you've launched RTD.

56:25 It doesn't look like there is much cannibalization. Could you give us perhaps a bit of an update on your potential plan to expand in The U. S? And if you will prefer to use a local partner or do it in house? And then secondly, going back to Sarti, if I may, on Slide nine. Could you give us an idea of this additional CapEx requirements that you would need if the brand is really being scaled up across Europe? And in terms of marketing difference with Aperol Spritz, is it the same price point? Or is it even more and is it even more tilted towards the female consumer? Thank you. Okay.

57:12 Think some good questions there. The first one is in terms of local production. Yes, on ready to drink, generally as a principle, I would much rather be in local production as close to the consumer and the customer as we can, particularly given logistics. I think that's a model that we can look to other industries that you want to particularly in higher volume products, you want to be as close as we can. It's not saying we're going to be building. Maybe further down the line if this is even more successful than we think it's going to be, but at the moment I'd rather use someone else's CapEx. There's more than enough capacity in America to be able to go after that. So I think we'll continue to see how that develops. I think easy one on Sarti, we have no additional CapEx requirements on Sarti. We've already invested in our major plant in Novilaguri. That's some of the extraordinary CapEx we put in. We're in good shape on that. I don't see any problems in capacity of that taking off. We have enough capacity for both Aperol, for Sartis, for Chennai, for Mondoro, for all of the brands. I'm very pleased that the previous team had already put that in.

58:12 I think the second part of the question, I think if I get this right, was the same price point. Is slightly higher, and as a result, what we find on this is with Sati is that it's not even though it's got a very exciting color in terms of being bright fluorescent pink, it does tilt a little bit female in terms of the color, but in terms of liquid delivery, we see lots of guys very happily drinking this as well. So it's more gender balanced. What comes through is a very different Spritz experience than the rest of our portfolio, more tropical, slightly sweeter, passion fruit and blood orange coming through, and as a result, think it's more gender balanced than anything. Thank you very much. The next question is from Richard Wittagen, Kepler Cheuvreux.

59:05 Yes. Good evening all. Thanks for the presentation. I have two questions as well, please. First of all, on the SG and A benefits, the 70 basis points that you're looking for this year, you already achieved 60 basis points in the first half delivery of these benefits in the second half of the year? And the second question is on on the FIFA World Cup. You're obviously not the, you know, not not the official sponsor, but but I think, Simon, you mentioned on Espolon, you had some activation and so on. So so is there any impact from the World Cup on your numbers in the in the second quarter? Let me start on the first one.

59:57 Honestly, when we see a 70 basis point, it means that the accretion in the second part, it needs to be higher, to be fair, because in order to get to 70, you need to have three sixty, but we are going to get more. There is also some phasing when you think you are we actually reduced our workforce by short of 500 people during 2025 So now we are also changing our operating model, which is going to be, I would say, the next phase to gain efficiency. And clearly, this requires some time. But we don't expect a drawdown in the second part of the year in terms of SG and A accretion. To the contrary, we expect some further efficiency. And I think, look, as we said at the Capital Markets Day, and you might find this a bit odd, but every single hire in the company is signed off by us.

1:00:48 So it's a very strong message to the organization about being disciplined with SG and A, making sure that we're putting the money where it's most important and has the biggest impact. Certainly from that side, I think we've we'll continue to keep that a big focus. In answering your question on FIFA and the World Cup, I don't think was a big contributor. I think there were a couple of things we saw that worked quite well. One is we had some block parties on Espelon that were irreverent. There was a bit of a counter the 11,000 a ticket final average pricing, which allowed people to get engaged in the event, in the momentum of the event, but in a fun way that was a bit light hearted and not too serious. So we had some watching block parties that worked very well. I think one of the other things is, I the UK team did a brilliant job of actually getting Aperol into some very high volume, high venue, football accounts, and watching some of the videos of England play and every time England scored, instead of seeing beer being thrown in the air, we saw this wall of orange going up as Aperol was being used to celebrate. I think the key thing here is our brands can play across these platforms, and it's not about the football, it's not about what's there, it's about the conviviality and the sociability.

1:02:03 As you heard me say before, our brands are uniquely positioned for that. We're down to earth, good fun, easy that can fit into those occasions very well. Thanks. The next question is from Chris Pitcher, Rothschild and Co. Redburn. Thanks very much and good evening all. A couple of questions. One, a follow-up on the ready to drink question in The United States. Just wondering your view on one of your big competitors sort of taking their cognac brand into the subcategory. I mean, clearly, there's enough stock around to do, whether it's something you're doing, whether I've missed it or not. And then secondly, a sort of a specific question on The UK, but more broadly for the group. Is The UK business now all the supply issues and disruptions a year ago coming through? Is that now on a much more even keel and you're well positioned for the summer? And more broadly on the group, do you feel in the second half that you've got most of your markets on a much more steady footing, having been through quite a disruptive sort of eighteen months? Thanks, Ron.

1:03:08 Yes. Hi, Chris. Look, in terms of The U. One, look, I don't really comment on other people's products. You can ask them that question. We're not planning to get into ready to drink in cognac. That's all I'll say at this stage. But I think in answering your question on The UK side, yes, very comfortable in terms of supply. I think we've had some good learnings. We've made good progress. I think our forecasting is getting better. I think we've also benefiting from the investments we've put into through the extraordinary CapEx to make sure that we've got the headroom to how to deal with it. Think some of the growth that we see in some of these markets where you're suddenly getting double digit, we're all delighted and the whole supply chain team's having a heart attack because it's more than they were planning, but I think what we've managed to do is build that flex into the system, and as a result, we have no issues in terms of supply. Our on time is full, is improving, and we continue to make good progress on our OEE and our COGS measures, which is what Francesco was mentioning in terms of some of the input costs and seeing those improve.

1:04:07 Thanks very much. The next question is from Tilly Enno, Morgan Stanley. Hi, good evening. Thanks for taking my questions. Firstly, just on The U. S. Sellout, clearly still incredibly strong compared to the overall market. But if I just compare the slide on sellout for H1 versus Q1, there was a bit of a moderation. Is there anything that you would call out there driving that? And if that sellout trend was to improve into the second half, you mentioned that you didn't do any further inventory adjustments on the non priority brands in Q2 in the end. If your overall sellout trends improved elsewhere, would you take the opportunity to do any more of that cleaning up of inventories on the non priority brands?

1:04:52 And then the second one, just for Francesco, you mentioned the working capital seasonality. There was quite a significant increase in receivables as well. Could you just explain a bit what was behind that and what was different this year? Thank you. Okay. Hi, Kelly. Look, yes, I'm answering your question. A couple of things on that. We've also got a bit of con base we need to think through between Q1 last year in The U. S, which you remember was quite a tricky quarter, and then a more positive Q2, and then cycling the opposite this year where we had a steady Q1 and a better Q2. So I think there's always a bit of that going on. Look, I do think that we need to recognize The U. S. Market is still tricky. I'm really pleased with what the team is doing, and we're getting a good lift in terms of overall market share, but look, it is a tough market, and so we're happy to carve that out.

1:05:43 I think the more we continue to do that, the more we'll continue to see those share gains coming through. We're well positioned for the long term. As you've heard me say before, we're 3% of The U. S. Market. So even if the market is tricky, we need to go and get an unfair share going forward, and that's what the team is doing. I think I'll pass it on to Francesco on the receivables side. Yes, absolutely. I mean, you actually are right. Receivable increase, the main reason is that they were linked to innovation that was skewed into quarter end. We've made many, many launches in ready to serve, in tap, in ready to drink. And so this was concentrated in order to be available for the peak season, and that's the reason for that. So it's in a sense, it's a business related reason, which is a positive driving innovation and volume.

1:06:30 Great. Thank you very much. The next question is from Edward Mundy, Jefferies. Good evening, guys. So I've got two sort of interrelated questions. First, and I don't think it's one fair question because someone I know you know the industry very well, but fifteen years ago, we saw the growth of the copycat spritz, especially the Hugo, and that lasted a couple of years and that was nipped in the bud, I think, about ten years ago. Could you remind us what was the strategy to sort of suppress that and for Aperol to really, do its thing? And then the second question is, as you've broadened distribution of Sarti outside of Germany, what are the learnings that you can bring to The US rollout, in particular, when it comes to taking other sweet spritzes such as this Elderflower variety?

1:07:20 Hi, Ed. Look, I think you're testing my memory here from fifteen years ago, but I think what I can tell you what we are doing on this is I think as we continue to broaden our offering within Spritz, mean, let's be clear, this is our category. We invented it, right? And as a result, our leadership position, what I'm really pleased to be seeing now is taking more of a category management approach. And so the fact that we have Mondoro doing very well in Europe, playing in the Ugo Spritz category, Ugo Spritz is not branded like Aperol, like Sati. And as a result, I think consumers are very happy for us to be able to come in and offer a great SE Hugo Spritz at a more competitive price point. I think some of that we'll continue to see, but the big thing for me is actually just as we see consumers work through Spritz, same as you see in other categories, the different flavors that build different consumers, and we are uniquely positioned to be able to take someone from a tropical blood orange, passion fruit, sati, into a more bitter apple, into a more bitter Campari, into a very bitter cinnar, with all the flavors that run through that. And I think that's unique.

1:08:32 And as a result, we continue to see the trade recognize that and want to work with us. So I think from that point of view, I think it will be more a combination of doing what we do well and just reconfirming our leadership in the category we created. I think your second question on Sati, some of the learnings we have on this is what's a bit different on this brand is we're still building the on premise. That's very much where the brand lives and we will build it that way. I think one of the learnings we have in Germany is that the brand can also be built in the off premise, and that's what we've seen, and we're seeing some of that already in The U. S. So if you look at Total Wine and More and the pace that the brand seems to be moving there, we're seeing a significant lift from it already. Now we're still in the on premise. We're still building the brand and three-two-one and all the stuff we do really well, but we're now seeing the off premise potentially playing a bigger role than we've seen in the past. I think that may just be that the as you see the more consumers looking for earlier in the day lower alcohol, all the brand theaters, all the great color cues and the exciting passion of Italy behind all of it, then I think we're seeing a bit more permission to steal from other categories.

1:09:45 Great. Thank you. The next question is from Paola Carboni, Equita. Yes. Hello. Good evening, Simon, Ciao, Francesco. I have a few questions. Mainly, if you can come back on COGS phasing at the gross margin level and if you can elaborate a little bit more what is the reason behind. Then on tariffs, I'm puzzling a little bit that we are going to have a bigger impact in H2, let's say. So I was expecting a bit more balanced impact. And so I was wondering whether you have been cautious to some extent in quantifying the €20,000,000 impact for the full year. And possibly a clarification, if I may, on your indication about phasing for marketing costs.

1:10:42 Is it still valid to stick to your previous indication of a skew on H1? I was I didn't get clear on that. Thank you. Okay. Do you want to start this one on gross margin? Okay. So gross margin, what actually we experienced in H1 is a number of positive on glass sorry, glass, agave input costs. The only negative, the only headwind was coming from logistic and insurance and the cost of moving goods that clearly are affected by what's going on. And so this is clearly we actually improve also our technology to do that. But at the end of the day, the price of energy has increased.

1:11:36 We on the other side, when it comes to tariff, you're right that there is 20,000,000 more than the 7,000,000 that you saw in H1. We are taking a balanced view about the quantification for the year. We don't know whether the 10% will continue or whether we are going to be 15%. There is a second investigation pending. Honestly, we don't know. So that's why we are taking a guess, which I think is an indication of where we see a reasonable amount for the entire year. I think, look, the only other thing adding to that, mean, you look at the volatility we've seen on this topic over the last twelve months, I think we're absolutely right. I think Francesco is going bang on just to make sure that we are being as prudent as we can. It also depends a little bit on the brand mix.

1:12:25 So if you're seeing what happens with tariffs in Mexico or tariffs in Europe, we're going have to see how some of that plays out. I think in terms of your other question around the marketing costs, we're still skewed to the first half, but to Trevor's question, it was or Ed's, I can't remember whose it was. But I think, look, if we see continued momentum behind the brands ahead of what we are planning, then we will see some balance in the second half. But I think we'll still stay skewed to first half front loading in terms of the key peak season. Okay, perfect. Thank you very much. Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks. Great. Thanks very much, everyone. Thanks for your time. Hopefully, you can see we've had a solid first half. I'm really pleased with the results. But yes, further questions that come up, please follow-up with the IR team directly.

1:13:19 And thanks for your time. Thanks very much. Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.