Campari on the stock exchange is in sharp decline this morning after the data relating to the 9 months of 2024, released yesterday after the markets were closed, which disappointed the market. The Spritz company closed the third quarter with declining sales and margins and expects the persistent unfavorable economic cycle to continue to impact the results of the'whole year, waiting for a gradual improvement starting from 2025. At around 11 am the stock was quoted at 6,63 euros on Piazza Affari, down 14,64% after a session low of 6,45 euros.
The Group expects a end of the year with low single digital growth in net sales and an organic performance of adjusted EBIT negatively impacted by an unfavorable sales mix and the failure to absorb fixed costs due to lower production volumes.
The company also intends to organize a recovery plan Portfolio rationalization, With the sale of some minor brands, and a program of cost containment. The Group has also launched a new plan 40 million buyback.
Looking for a new CEO
Meanwhile, the search for a new CEO continues. By June of next year, Campari will have a new CEO: "the process of selecting the new chief executive officer, which represents an absolute priority, is proceeding at full speed" says a note, adding that the company "hopes to conclude within the first half of next year". Campari has been waiting for a new leader since he resigned on September 18th Matteo Fantacchiotti from the role of CEO, just 5 months after his appointment. On that occasion the board had chosen Paolo Marchesini and Fabio Di Fede as interim co-CEO and executive members of a leadership transition committee chaired by former CEO Bob Kunze-Concewitz.
The third quarter was the heaviest
In the first nine months of the year, the Italian spirits giant has seen sales grew by 3,4% overall, with a perimeter effect of +2,1% (46,5 million), mainly driven by the integration of the newly acquired Courvoisier, while the exchange rate effect was negative by 0,8%. In the third quarter turnover saw a decrease of -1,4%.
On the contrary the adjusted gross operating margin fell from 601,3 million to 590,7 million euros (-1,8%) and consequently, the margin went from 27,3% to 25,9%. Campari ended the first nine months of 2024 with an adjusted pre-tax profit of 452,1 million euros, down 4,6% compared to the 473,8 million recorded in the same period of the previous year; accounting pre-tax profit was 423 million euros (-5%).
In the 3rd quarter alone 2024 revenues rose 1,4% to €753,6 million, while adjusted pre-tax profit fell 23,2% to €114,4 million.
At the end of September 2024 the debt Campari's net debt rose to €2,56 billion, compared to €1,85 billion at the beginning of the year, due to the net impact of the Courvoisier acquisition (€477,3 million), capital expenditure (€294 million) and dividend payments (€78,1 million) as well as the acquisition of a 14,6% minority stake in Capevin Holding. The net financial debt to adjusted EBITDA multiple as of September 30, 2024 was 3,5x.
“The net sales performance in the nine months,” the company explains, “was influenced by a combination of concurrent factors, in particular macroeconomic weakness, bad weather, pressure on disposable income due to inflation and reduced consumer and distributor confidence, with a peak in the third quarter, despite the outperformance versus the industry in the main brand-market combinations. Profitability performance – the group added in a note – was also influenced by the continuation of already planned infrastructure investments, in a challenging market context.”
The 4 House of Brands of the new operating model in the drawer
In medium term, the group aims at an operating model based on four House of Brand newly created, intended to interact with the three existing Regions. In addition to the already created House of Cognac&Champagne, the new model will include the House of Aperitif, House of Whiskey and Rum and House of Tequila. Another organizational intervention will concern the Portfolio rationalization, with the aim of divesting non-strategic brands. “The combination of these two initiatives, together with a cost containment program leveraging the new operating model, which includes optimization in resource allocation, simplification and review of end-to-end processes, as well as technology investments, including next-generation planning processes and enhanced business analytics, will allow Campari Group to achieve greater efficiencies in structural costs – explains the company – . The program is expected to generate a total benefit of 200 basis points in terms of incidence of structural costs on net sales over the next three years by 2027, with a corresponding increase in the operating margin”.
