Gruppo Campari sees sales up but profits hit by acquisitions and poor exchange rate

By Arabella Mileham

Published: 10 March, 2015

Italian drinks group Gruppo Campari saw sales rise 2.4% in 2014 - but group net profit fell 13.9% to €43.2m, following one-off costs involved in recent acquisitions and an unfavourable exchange rate.

Campari Campari

The Italian company saw overall sales rise to €1,560m, but operating profits fell 11.9% to €255m and EBITDA also fell 10.5% to €294.4m. Despite foregian exchange rates improving in the final quarter, overall these were negative (-4%) during 2014.

However, the Italian drinks firm said growth had been "solid", with sales performance doubling over the full year from 1.7% in 2013 to 3.4% in 2014.

Chief executive officer Bob Kunze-Concewitz said organic performance was "solid" and in line with expectations. "Thanks to the acceleration of organic sales growth and the strong accretion in gross margin in the fourth quarter, organic EBIT pre one-off's was flat on a full year basis. This result was achieved despite enhanced advertising and promotion spending and significant investments in new route-to-markets," he said.

He noted volatility in emerging markets and the price competition in some of the Group's core regions would continue in 2015, but overall business and margins were likely to be positively impacted by the performance of its top 5 spirit franchises, in particular its aperitifs business, rum portfolio and the American whiskies.

"We believe that the business overall and margins will benefit from the expected return on recent route-to-market initiatives and production investments, more favourable trends in input costs and a positive contribution from forex," he said.

Tge top international brands - including Campari, Aperol, and the Jamaican rum portfolio - did well in the final quarter of the year, but operating margin was down 0.9% to €793m overall. Growth primarily came from the "high potential" brands, which rose 12.8% to €253.4m.

aperol

Campari saw overall sales of 9.8% and Aperol also grew, rising 7%, with gains across Italy, the UK and USA. Jamaican rum saw "encouraging momentum" of 4.4%, the group said, and Glen Grant and Espolon tequila also performed well. However sales of Wild Turkey fell 3.2%, largely due to the flat US market and RTDs were also down 4.2%. Cinzano also fell 1.4%.

Sales in the Americas, which accounts for nearly 40% of sales, rose 4% organically, but were affected by foreign exchange rates (-6.5%), as well as the company realigning shipments in the USA.

Italy also saw a good performance, up 3.5% organically, boosted by the group's acquisition of Fratelli Averna last March, adding 5.9% of perimetre sales.

Aperol in particularly grew strongly, up 5.4% and Campari recovered from slow initial growth in the final quarter. Across the rest of Europe, sales grew 3.2% on the back of strong sales of Aperol, and growth of sparkling wine in Russia.

Despite distribution changes in the UK and Spain - Catalyst Brands and Gruppo Campari mutually terminated the UK distribution agreement at the end of last month - and poor performance in Germany.

Across the rest of the world, growth was strong in emerging markets, particularly Nigeria, South Africa and China, but Australia was weak, down 5.1%.

The company acquired Canadian whiskey Forty Creek Distillery in March 2014 for US$170 million, and Italian spirit and bitters company Fratelli Averna a month later for €103.75 million.

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