Davide Campari-Milano (CPR) Q4 2023 earnings summary

Executive summary

• FY 2023 net sales were €2,918.6m, up 8.2% reported and 10.5% organically; Q4 organic growth was 10.6%, led by aperitifs, tequila and bourbon.

• Adjusted EBIT rose 15.5% organically to €618.7m, with 90bps organic margin accretion; excluding €18.0m of A&P normalization, adjusted EBIT was €600.7m, up 12.3% organically.

• A third consecutive year of double-digit organic growth across operating profit indicators, with pricing offsetting input-cost inflation and continued investment in brands and commercial capabilities.

• Industry outperformance continued across the US, core European markets and Asia despite macroeconomic challenges and post-pandemic consumption normalization.

Financial highlights

• Gross profit increased 11.2% organically to €1,700.1m; reported gross margin was 58.3%, down from 58.9% in FY 2022, with 30bps organic margin accretion.

• Adjusted EBITDA was €728.9m, up 10.4% reported and 15.5% organically; excluding A&P normalization, it was €710.9m, up 12.7% organically.

• Reported operating profit was €540.2m; reported profit before tax was €466.5m and adjusted profit before tax was €544.2m, up 1.2%.

• Adjusted net profit was €390.4m, up 0.7%; reported net profit was €330.5m, down 0.7%. Adjusted basic EPS was €0.35, up 0.5%.

• Free cash flow was negative €180.0m versus positive €188.7m in 2022, mainly reflecting inventory-related working-capital absorption and higher capex.

Outlook and guidance

• 2024 outlook anticipates continued industry outperformance; agave trends and moderating inflation are expected to benefit the P&L gradually from H2.

• Incremental fixed production costs, 2023 high-cost safety stock, negative Mexican peso FX, continued brand investment and front-end infrastructure spending are expected to weigh on results.

• Q1 faces a high comparison base after prior-year pricing phasing; FX headwinds are expected to persist but ease YoY, while Courvoisier should add to perimeter growth after closing.

• Medium-term margin expansion is expected from sales mix, pricing, easing input-cost inflation and efficiencies, alongside continued reinvestment in brand building and commercial capabilities.