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Gruppo Campari consolidated its acquisition of the Wild Turkey whiskey brand in the first half |
ITALY. Italian drinks giant Gruppo Campari has announced “very strong” first-half sales results, aided by the acquisition of the Wild Turkey whiskey brand.
During the period, Gruppo Campari said it delivered “significant growth” across all performance indicators, especially due to organic growth, driven by a number of factors: “very good” consumption momentum across key brand and market combinations; the consolidation of the Wild Turkey acquisition; and an easy comparison base versus last year’s first half, which was hit by the credit crunch and destocking activities.
Buoyed by a favourable sales mix, all operating profit indicators posted strong growth, notwithstanding a considerable increase in marketing spending, the company said.
For the six months ended 30 June 2010, sales advanced +16.7% to €515.7 million (organic growth +8.7%), EBITDA before one-offs surged by +17.9% to €128.6 million (organic growth +13.7%, 24.9% of sales), and group net profit climbed +15.2% to €69.3 million.
Commenting on the results, Chief Executive Officer Bob Kunze-Concewitz said: “Our performance in the first half of 2010 was very positive with significant growth across all key indicators. Looking forward to the remainder of the year, we have a balanced view of risks and opportunities. Specifically, our continued good consumption momentum across key brand and market combinations should help cushion the impact of tougher comps in terms of cost of goods and a weaker sales mix driven by seasonality. Whilst volatility might impact trading across coming quarters, we remain reasonably optimistic about our full year prospects.”
Spirits’ double-digit growth
Gross margin increased to €299.6 million, up 20.4%, or 58.1% of sales, mainly thanks to a favourable sales mix driven by spirits’ double-digit growth.
Sales of spirits (76.9% of total sales, up from 72.3% in the first half 2009) grew +24.2%, the combined result of organic growth of +13.9% and a positive exchange rate effect of +2.5%.
Campari brand sales increased by +10.3% at constant exchange rates (+13.3% at actual exchange rates), thanks to the positive performances in key European markets and a strong recovery in Brazil.
SKYY vodka sales grew by +7.6% at constant exchange rates (+8.5% at actual exchange rates), driven by a favourable comparison base versus last year’s first half, a positive performance of the whole SKYY franchise in the US and continued growth in key international markets.
GlenGrant achieved a positive performance (+18.1% at constant exchange rates), while Cinzano vermouth sales grew by 3.3% (+5.2% at constant exchange rates), mainly thanks to a recovery in the key Russian market.
Sales by region
Looking at sales by region in the first half, sales in the Italian market (39.6% of total group sales, down from 45.2% in the first half 2009) recorded an increase of +2.2%, thanks to organic growth (+2.9%), partly offset by a negative perimeter effect of -0.7%.
Sales in Europe, excluding Italy, (20.9% of consolidated sales) increased by +11.9%, thanks to positive trading both in Western and Eastern European markets, demonstrating positive organic growth of +11.0%.
The Americas (34.1% of total sales) posted overall growth of +46.1%, driven by a positive organic increase of +24.7%, a positive exchange rate effect (+6.4%) and a positive perimeter effect (+15%), the latter due to the acquisition of Wild Turkey. In the Americas, the US market registered an organic increase of +13.3%, mainly driven by a favourable comparison against last year’s first half.
In Brazil, organic sales surged by +61.3%, thanks to a return to regular trading after the full acceptance of the new commercial policy and a favourable comparison base, the group said.
Sales in the rest of the world (including duty free), which accounted for 5.4% of total sales, climbed by +9.6% overall, driven by a positive perimeter effect of +37.6%, a positive exchange rate effect of +2.2% and a negative organic change of 30.2% mainly due to its transition to the newly established distribution platform in the key Australian market.
Buyout of remaining stake in Cabo Wabo tequila
On 30 July 2010, an agreement was signed with the minority shareholder of Cabo Wabo for the anticipated exercise of options relating to the remaining 20% stake in the tequila brand. Gruppo Campari bought the controlling (80%) stake in Cabo Wabo in 2008. The price paid for the purchase of the 20% stake was US$11 million.
Moreover, based on the agreement, an estimated earn-out of US$4 million is expected to be paid to the selling shareholder in the three years following the closing of the deal.
Cinzano in Argentina
On 23 July 2010, Gruppo Campari signed an agreement for the anticipated termination of its contract with Cepas Argentina S.A., following the acquisition of the Cinzano brand. Based on this contract, Gruppo Campari granted Cepas Argentinas S.A. the manufacturing and distribution rights for Cinzano in Argentina until 2026. Gruppo Campari agreed to pay €11 million, by 31 August 2010, for the recovery of Cinzano production and distribution rights.
As of September 2010 the distribution and manufacturing activities will be taken over by Sabia S.A., an Argentinean company acquired by Gruppo Campari in 2008 and now wholly owned.
Merger of Campari Italia into Davide Campari-Milano S.p.A.
On 4 August 2010, the Board of Directors of Davide Campari-Milano S.p.A. approved the proposed merger of Campari Italia S.p.A. into Davide Campari-Milano S.p.A. The objective of the merger is to simplify the group’s organisational structure and achieve operational efficiencies by integrating the two companies’ production and distribution activities.
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