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, sectoral, and climatic headwinds, with profitability impacted by lower fixed cost absorption and ongoing investments.

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

• The company is implementing a new operating model with four 'houses of brands' and three regions, accelerating portfolio streamlining, and launching cost containment and efficiency programs.

• Major acquisitions (Courvoisier, Capevin Holdings, Ancho Reyes/Montelobos) and leadership changes, including an ongoing CEO search, marked the period.

Financial highlights

• Group sales reached €2,277 million, up 3.4% reported and 2.1% organically; Q3 organic net sales down 1.4%.

• EBIT-adjusted was €499.4 million (21.9% margin), down 4.2% organically and 4.1% reported; EBITDA-adjusted €590.7 million (25.9% margin), down 2.0% organically.

• Pre-tax profit-adjusted at €452.1 million, down 4.6% year-over-year; net financial debt at €2,564.0 million, up €710.5 million due to acquisitions and capex.

• Net debt/EBITDA-adjusted ratio at 3.6x (up from 2.5x at year-end 2023), mainly from Courvoisier acquisition.

• Gross margin at 58.5% (down 70 bps year-over-year), diluted by mix and COGS inflation.

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-adjusted margin for 2024 expected to be down, with margin dilution from lower fixed cost absorption, unfavorable sales mix, and continued investment.

• Medium-term guidance targets a return to mid- to high-single-digit organic growth and margin accretion by 2027, supported by premiumization, cost efficiencies, and portfolio streamlining.

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