Campari has warned that its ability to grow gross margins this year would likely be impacted by “some temporary headwinds” after its first-half adjusted operating profit rose 2.1% organically.
Shares in the Italian company fell as much as 8% after the results and were down 2.5% in late afternoon.
Traders cited worries about margins and a cautious outlook as reasons for the decline.
Outlook
Campari’s newly appointed chief executive Matteo Fantacchiotti told Reuters, “At the moment we have an outlook more for a flat margin (for 2024), not negative, as we have lost a chunk of opportunity to improve our mix in two important months of the year.”
Fantacchiotti was referring to May and June in his comment.
Campari said factors such as poor weather in parts of Europe had hit its gross margin.
This then weighed on high-margin aperitifs, and a delay in agave supply contract renewals, “guiding both unfavourable sales mix and shifting some of the related expected cost of goods sold benefits into next year.”
Agave is a key ingredient in spirits such as tequila.
First-half organic revenues at the maker of Aperol and Campari bitters rose 3.8% to €1.52 billion with an acceleration seen in the second quarter.
The group reported sales solid growth in the US, which is its single biggest market, but bad weather hit revenues in Italy, France and Britain, Campari said.
Adjusted operating profit rose to €360 million in the period, broadly in line with analysts’ expectations.
Future
Shares in Diageo also fell on Tuesday, as the world’s top spirits maker narrowly missed its annual profit forecast and warned that challenges could persist in the coming year, offering a gloomy backdrop for the sector.
Fantacchiotti said, “We think market reaction [to the stock] was amplified by read across from competitors.”
He added that he was satisfied with the company’s sales and revenue positive trends.
Fantacchiotti reiterated the company remains keen on M&A opportunities after completing the buyout of French cognac house Courvoisier.
He said, “We are continuing looking into potential deals which can increase our strength in Asia and the Americas.”
He added that the focus moving forward was on premium products.
