Davide Campari-Milano (CPR) Q3 2024 earnings summary

Executive summary

• Organic net sales grew 2.1% in the first nine months of 2024, but Q3 saw a 1.4% decline due to macroeconomic, sectorial, and climatic headwinds, with profitability indicators impacted by muted top-line and ongoing investments.

• Outperformance in key brand-market combinations, especially aperitifs and tequila, but overall results reflect challenging conditions, particularly in Q3.

• EBIT declined organically by 4.2% with margin dilution, mainly from lower absorption of fixed costs and increased SG&A due to ongoing investments.

• The company is implementing a new operating model with four 'houses of brands' and accelerating portfolio streamlining to focus on key priorities and improve efficiency.

• Strategic initiatives include a significant cost containment program targeting a 200 basis point SG&A reduction by 2027 and a €40 million share buyback program.

Financial highlights

• Organic net sales up 2.1% for nine months; Q3 organic net sales down 1.4%; group sales reached €2,277 million, up 3.4% reported.

• EBIT-adjusted was €499.4 million (21.9% margin), down 4.2% organically and 4.1% reported; Q3 EBIT down 18.2% organically.

• Pre-tax profit (adjusted) at €446.3 million, down 5.6% year-over-year; group profit before taxation was €423.0 million, down 5.0% reported.

• Net financial debt at €2,564.0 million as of September 30, 2024, up €710.5 million year-over-year, mainly due to Courvoisier acquisition and capex.

• Net debt/EBITDA ratio at 3.5x pro-forma (3.6x reported), reflecting recent acquisitions.

Outlook and guidance

• Full-year 2024 net sales expected to show low single-digit growth, with Q4 remaining positive but impacted by tough comps and ongoing headwinds.

• EBIT margin for 2024 expected to be down, with margin dilution from lower fixed cost absorption and continued investment.

• Medium-term guidance targets a return to mid- to high-single-digit organic growth and 200 basis points SG&A reduction by 2027.

• Margin expansion in 2025 expected from tailwinds in agave and packaging costs, and normalization of fixed cost absorption.