Davide Campari-Milano NV (DVDCF) (Q2 2024) Earnings Call Highlights: Strong Q2 Performance and ...

GuruFocus News
3 min read

In This Article:

  • Organic Net Sales Growth: Up 3.8%, with Q2 acceleration of 6.9%.

  • EBIT Organic Growth: 2.1%, with a margin of 23.6%.

  • Net Debt to EBITDA Adjusted: 3.5 times on a reported basis.

  • Gross Margin: Impacted by negative mix effect, with a 30 basis point dilution year-to-date.

  • EBITDA Adjusted: EUR 418.8 million, with a 1.9% value growth.

  • Recurring Free Cash Flow: EUR 130.8 million, up EUR 222.4 million from the previous year.

  • Operating Working Capital: 44.2% of net sales as of June end.

  • Net Financial Debt: EUR 2.553 billion as of June end.

  • Adjusted Pretax Profit: EUR 333.3 million, up 2.2%.

  • Net Profit Adjusted: EUR 239 million, up 2.2%.

Release Date: July 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Davide Campari-Milano NV (DVDCF) reported a positive set of results with organic net sales up 3.8%, driven by strong performance in Q2 with a 6.9% increase.

  • The company experienced continued strength in aperitifs, particularly Aperol and Campari, with notable growth in the Americas and Germany.

  • Espolon showed impressive double-digit growth, contributing significantly to the company's overall performance.

  • The company successfully managed to offset cost increases with pricing strategies, maintaining a balance between pricing and COGS.

  • Davide Campari-Milano NV (DVDCF) demonstrated resilience in Europe despite poor weather conditions, maintaining growth in key markets like Germany and Spain.

Negative Points

  • The company faced temporary headwinds due to negative sales mix effects, particularly from poor weather impacting high-margin aperitifs in Europe.

  • Gross margin was negatively impacted by the fast growth of Espolon, which is still dilutive at the gross margin level.

  • There were challenges in depleting last year's high-cost inventory, affecting the company's cost structure.

  • The net debt to EBITDA ratio increased to 3.5 times, reflecting higher financial leverage.

  • The Asia Pacific region showed a negative performance in the first half, with a 10% decline, although improvements were noted in Q2.

Q & A Highlights

Q: Can you provide more detail on the H2 gross margin development and the impact of low agave prices? A: Paolo Marchesini, CFO, explained that while pricing and COGS are balanced, the mix has been negatively impacted by poor weather and Espolon's growth. The expected gross margin expansion may not be achieved, with a potential reduction of EUR20-25 million. Agave contract renegotiations are ongoing, with benefits expected in 2025.

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