Davide Campari-Milano N.V. (CPR) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group Full Year 2022 Results Conference Call and Audio Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Bob Kunze-Concewitz, CEO of the Campari Group. Please go ahead, sir.

Our full year '22 call. As you can see, 2022 was quite a challenging and intense year but brought us quite a bit of success -- satisfaction as we continued our successful execution of our long-term growth strategy. Clearly, we have 4 key pillars here: continued focus on sustainable long-term growth and brand building, which we've been doing consistently, and that is demonstrated by a strong organic top line performance, notwithstanding the quite challenging macro environment, as well as a significant logistical and supply chain headwind. We've been able to take effective pricing across all brand market combinations, particularly in the core aperitif business, and we continued our engagement across all channels for our core brand building as well as occasion ownership. So it's also, I think, important to underline the fact that our 3-year cumulative organic sales growth reached 40%, with quite an outperformance of our aperitif and tequila, and we have continued sustained double-digit organic sales growth of Aperol in its 19th year after acquisition but more on that a little bit later on. Particularly, I think with one very important chart, which states that we're only at the very beginning of the runway on this key brand. Our second building block for the year was M&A, and we continued to add some very nice additions to our portfolio. We've strengthened our leadership position in aperitif, the acquisitions both of Picon, a leading bitter aperitif brand in France, as well as Del Professore, a super premium vermouth brand seen in the best parts in the world. We've enriched our bourbon portfolio and are priming it to become a major leg of growth through the acquisition of the Wilderness Trail Distillery in Kentucky, as well as adding the global distribution rights and investments in Howler Head Kentucky flavored bourbon. Last but not least, we've enhanced our focus on digital and e-commerce via our investment step up in Tannico, which is the leading Italian e-commerce platform for wines and spirits. And we've reached full ownership via a 50-50 JV with Moët Hennessy. Our digital journey and capacity expansion journey also were quite robust. We further developed our digital capabilities across the whole organization by accelerating our digital transformation programs. Our production capacity expansion meant to support the expected brand growth trajectory in core markets which, obviously, are driven by consumer demand. We're upgrading distilling capacity in Mexico for tequila, and further investments both for Wild Turkey bourbon as well as the aperitif production for the coming years. And we've enhanced our route-to-market with particular focus on Asia, with an in-market company setup in India, which is progressing very, very nicely. Last and -- but not least, we're also quite proud to report solid progress on our sustainability agenda. We've been recognized as a B rating to the CDP climate change questionnaire and have issued our first-time disclosure of greenhouse gases Scope 3 emissions. Our core environmental targets were achieved ahead of time. Our GHG emissions from direct operations Scope 1 and 2 were reduced by 47% versus 2019, and I will remind you that this target was originally set for 2030, so we've achieved that. Water usage was reduced by 48%, again, versus the same time benchmark. And again, we've achieved the 2030 objectives. Moving on to the more quantitative financial part of it. Net sales came in at EUR 2.6976 billion, quite a robust organic sales growth of 16.4%, or actually almost 40% versus 2019. We have very good and robust brand momentum boosted also by price increases. Obviously, we've seen normalizing trends in Q4 where we grew in the high single digits, 9.6%, where we also benefited from strong pricing whilst reflecting, at the same time, the expected supply chain constraints and headwinds. Our adjusted EBIT came in at EUR 569.9 million. Again, a very strong growth on an organic basis, up 19.1%, up 33.4% versus 2019, delivering also, and this is quite positive, a 50 basis points margin expansion. Unfortunately, our gross margin dilution came in at 120 bps negative in the fiscal year, reflecting obviously the expected COGS inflation, which were partially mitigated by pricing and came in at minus 20 bps in Q4, thanks to strong pricing, which kicked in, in the second half of the year. We maintained sustained investments behind A&P and SG&A, and we're able to deliver, at the same time, margin accretion, thanks to strong top line scale effects. FX -- foreign FX were quite positive. They [ created ] a EUR 50 million boost on the adjusted EBIT line, and this was mainly driven by a strong U.S. dollar. Our perimeter was also positive, but this is negligible at EUR 1.6 million on the EBIT-adjusted basis. Net debt on adjusted EBITDA came in at the end of the year, 2.4x. Clearly, it increased as one would expect from 1.6x at the end of the previous year due mostly to the net debt level incurred via the acquisition. Net on net, quite a successful year, and we proposed to maintain full year dividend of EUR 0.06 per share, unchanged versus last year. I think what is really important is to really see the quality of the results. We've grown our top line by overall 47% since 2019, 40% of that organic and 7% perimeter in ForEx. But you really do see the quality when you look at the 3-year cumulativeness and organic growth by both top markets as well as brands. I mean all of our top markets grew in significant double digits. France, for instance, reaching 133%. And if we look at our brands, we see exactly the same result over the 3 years, with quite an overperformance of our aperitifs, in particular, Espolòn, in the very hot tequila category in the U.S. growing by 134%. If we look at this performance on the annual basis, again, we see very strong double-digit growth rates across all of our regions and across all of our priority brands clusters. Net in net, the Americas remain our largest cluster with 46%, clearly led by the U.S., reaching 28%, and our Global Priorities at 57% where the aperitifs and the brown spirits, where we're able to grow significantly and help make up, I think, for some lack of growth on SKYY Vodka. Moving on to the performance by regions. Our largest region, the Americas, grew by 16.6% on an organic basis. The U.S. grew a very robust 14% and this despite quite a tough comp base. You remember that in 2021, we grew our U.S. business by 18.9%, and we're continuing to see positive momentum both on the on-premise as well as resilient home consumption. This positive full year performance was mainly driven by Espolòn, which continues to go from strength to strength, up 35.1%. And had the brand been constrained, it would have grown much faster than that. Same holds true for the core Wild Turkey Bourbon, which was up only 2.6%. The higher end of our bourbons, Russell's Reserve, growing even faster at 37.7%. Aperol almost growing by 50%, 49.8%. Campari also accelerating in the second half of the year to finish at 33.1%, thanks to very strong consumer demand. Clearly, all of these brands also benefited from price increases. The shipments of Grand Marnier were slightly down, unfortunately, due to continuing glass supply constraints and a very tough comp base in the previous year where the brand was up by 44.6%. If we look at the SKYY portfolio, it declined slightly. We have sustained brand momentum in Q4 where we're up 12.5%. Again, thanks to the strong performance of Espolòn, which accelerated to 40.4%; Wild Turkey, double digit, up 11.9%; Russell's, up 37.6%; as well as continued strong performance of our aperitifs as well as amari. On a 3-year basis, our U.S. business grew by 39.3% or a 3-year CAGR of 11.7%, double-digit. Jamaica continues to perform very, very nicely, up 29.8%, with strong double-digit growth, and again, an acceleration in Q4, where we were up 38.5%. And here, the key drivers are Wray & Nephew Overproof as well as the Campari brand. The rest of the region was up 17%, with quite a positive performance in Canada driven by the same usual suspects. And very strong growth across the rest of the region, Brazil, Mexico and Argentina, again, driven by Campari, Aperol. But here, what's the difference is that the SKYY portfolio is performing very, very well and helping mitigate softness in the U.S. Moving to our second largest region, Southern Europe, Middle East and Africa, up 18.2%. Italy, our second largest country, up 15.4%. Very satisfactory full year performance, with, again, the aperitifs delivering very solid results. Aperol, in its 19th year since the acquisition, was up 20.5% in its largest market. Campari was up 26.4%. Nonalcoholic Crodino, up 15.7%, and Campari Soda, up 6.2%. Clearly, we have very good strength in the on-premise and have been able to also introduce very successful price increases. Last and -- but not least, the good weather was also a help. We had a slight positive -- negative, sorry, performance in Q4, down 1.5%, mainly due to glass availability, and that particularly on the Cinzano sparkling wine in the peak season. I would also like to underline the fact that in Q4 2021, Italy has grown by 60%, so that's quite a tough comp base, notwithstanding that Aperol and Campari continued, again, to perform very well both from a volume as well as a pricing standpoint. Our 3-year cumulative organic growth in Italy was up 30.1% or a 3-year CAGR of 9.2%, which is quite good and impressive in such a mature market for our portfolio. France was up 12.1%. Again, very positive of underlying trends, thanks to particularly our core Aperol and Riccadonna, so the Aperol Spritz occasion continuing to grow double digits. Champagne Lallier and Rhum Agricole portfolio also had nice growth. The rest of the region was up a very strong 38.3% as we continued to gain market share across many markets, particularly Spain with our aperitif, Nigeria and South Africa with our Bisquit cognac. Global Travel Retail was up very strongly, 80% thanks to return to travel, particularly by airlines. And again, the key drivers are our aperitif as well as The GlenGrant and Grand Marnier. Moving on to North, Central and Eastern Europe, our third largest cluster, up a very strong 14.9% despite the effects of the war on the Ukrainian and the Russian market. Germany, our largest market, up at very, very strong 18.6%, clearly outperforming the market. And this strong overall performance is linked to both resilient home consumption as well as strong on-premise which was, at the end, also boosted by pricing. Aperol continuing to go from strength to strength, up 31.9%. The convenience Aperol Spritz ready-to-enjoy, up almost 100%, 91.9%. Doing very well on nonalcoholic aperitifs, so Crodino up 32.3%. And Campari, and we're quite proud of this, also grew mid-single digits following a very, very strong price repositioning. Our Q4 performance was also quite positive, up 7.2%, again driven by the aperitifs. Here, clearly, we were also impacted negatively by the glass availability issue on the Cinzano sparkling wine business. In Germany, our 3-year cumulative organic growth reached 37.6% or a 3-year CAGR of 11.2%. U.K. continued to grow double digit, up 13.7% and this despite a very tough comp base. In 2021, we were up by 39.1%. And here, we continued to be propelled forward with Aperol as well as Magnum Tonic. And again, here on Magnum Tonic, we could have done significantly better hadn't we had product availability constraints. Crodino, Campari and Wild Turkey Bourbon also performed well and gave us satisfaction. The rest of the region, up double digit as well, 12.4%. And this is largely led by the aperitifs including Crodino, which is starting to become important on an international basis as well. Last and -- but not least, APAC, up 12.4%. Australia, 9.6%, making a very strong comeback in Q4, up 31.1%, thanks to the strong shipments recovery in the Wild Turkey RTD business, which is really our largest business by far there, which was up by 35.7%, where we were able to recover from the persistent ocean freight challenges we had during the year. And we've also had very nice growth on the Wild Turkey Bourbon business, up 68.9%; Aperol, up 27.8%; and Campari, up 52.4%. In Australia, we have a 3-year cumulative organic rate of 31.9% or a 3-year CAGR of 9.7%. If we look at the rest of Asia, developing very, very nicely, up 17.6% despite clearly the very unimpressive results in China linked to the lockdown. Very strong performance in South Korea, becoming clearly 1 of our main markets over time and a very premium market as well, up 84.1%, thanks to the high-end Wild Turkey offerings, high-end GlenGrant, X-Rated as well as SKYY. Japan was positive after a strong Q4, driven by Wild Turkey Bourbon, The GlenGrant and SKYY. Again, China, as I said earlier, was negative due to the COVID lockdowns. We've seen continued good momentum elsewhere, including New Zealand. And this particularly thanks to the group's enhanced investments across all levers. And we're very happy to see India becoming meaningful for us, delivering very positive performance off a small base but growing more over time. Really appreciate that. Going into the details of the brands. Aperol, in its 19th year, is going from strength to strength, up 28.2% on an organic basis last year to reach 22% of group sales. And this data actually excludes the ready-to-enjoy, which is another 1.5% of group sales. Very strong double-digit growth, as I said in its 19th year after the acquisition across all of our markets, with very healthy brand momentum and the successful execution of our growth model, which was further boosted by price increases. Very nice performance in Italy, up 20.5%; Germany, 31.9%; U.S., almost 50%; France, 35.5% and the U.K. 20.9%. Clearly, beyond these core markets, we have also a very strong momentum across the rest. Spain, up 84.6%; Austria, Belgium, Poland, Czech Republic, all growing double digits, as well as newer markets such as Brazil, up 40%; Argentina, 75%; Mexico, 64%; Canada, 21% and so on and so forth. The brand, on a 3-year cumulative organic net sales basis, grew by 69.1% or a 3-year CAGR of 19.1%. But beyond all these nice statistics, I think the most important part to underline here is the figures summarized in the chart on the bottom right, and that clearly demonstrates that we're only at the very beginning of a very long Aperol runway. First of all, you know that we first launched in Italy and developed the growth model in Italy. And the second thing is that over the years, we've seen in market after market that roughly 2/3 of the volume of Aperol come from beer. Now, if we look at the per capita consumption of Aperol in Italy, at 0.42 liters of Aperol, that's roughly 1 liter of Aperol Spritzes or 8 Aperol Spritzes, so it's really nothing. And that only represents 1.27% of the beer per capita consumption. So we clearly have a long, long way to go with Aperol at 1 liter and beer over 30 liters. So in the main market, we see good runway forward, and then you can draw the contrast versus the other markets. The second largest one, Germany, has less than half the per capita consumption of Italy. If we look at our third largest market on a value basis, the U.S. has 1/42, so looking forward. And we're looking at amplifying our brand building activities, particularly deseasonalization, and continuing to enter other usage occasions such as new locations, and this will continue to give us very nice satisfaction in the years ahead. Campari also is benefiting significantly from this bitters boom. Campari, up 23.8% organically, reaching 11% of sales. More than 162 years in the market in Italy growing by 26.4%; the U.S., up 33.1%; Brazil, 81.6%; Jamaica, 37.6%. Clearly, we're seeing quite resilient off-premise momentum due to at-home mixology as well as a continued health in the on-premise combined with the success of the consumer-driven Campari spritz, amongst other cocktails. So Campari has a very nice constellation of the classic cocktails like the Negroni, Boulevardier, Americano, et cetera, providing strong premiumization and halo in the on-premise and the Campari Spritz clearly attracting also from the beer and wine basis and turbo-boosting the growth prospects of the brand going forward. Very positive momentum in Q4, up 7.2%, with Jamaica also double digit. In the U.S. -- and in the U.S., particularly, we have the Negroni Sbagliato craze. And if you really want to think about it, the Negroni Sbagliato is a sweeter Campari spritz. So at the end of the day, the spritz formula for Campari is going to become a major growth driver, and we can see that the per capita consumption of Campari is quite low compared to Aperol where, even in Italy, we're only at 1/3 of Aperol, and it gets even lower on the market clusters. So watch that space. Moving on to our third largest cluster, which is Wild Turkey. Wild Turkey doing very nicely, continuing to take market share and grow and premiumize in the very exciting bourbon category, particularly in the U.S. and in Asia. We're up 21.4% on an organic basis, reaching 8% of group sales. Core bourbon grew by 26.2%, which is fantastic. In the U.S., we are up by 22.6%; South Korea, more than 145%; Australia, 23.7%. Again, here, we have a combination of classic cocktail revival in the on-premise as well as at-home mixology, which also enables us to put into the market some strong pricing. The higher end of our bourbon portfolio growing even faster. Russell's Reserve up 36.4% in the full year, again, thanks to the core U.S. and South Korea. Clearly, again here, if the volumes weren't constrained, we would be able to sell really a multiple of that number. And we're continuing to drive our premiumization. We've been able to significantly reposition the Russell's Reserve 13, which retails now for almost $300, and you can find it actually in stores at about $700. So there's huge demand for that. We're seeing very nice 3-year KPIs. On a cumulative basis, up 48.9%; on a CAGR basis, up 14.2%. Again, this is another key part of our portfolio which is constrained by current capacity issues, and we will be tackling these and sharing with you some good news later on. Moving on to Grand Marnier. Grand Marnier of the Global Priorities brands is the only one, let's say, disappointing, flattish at 1.3%. Here, we were impacted by glass supply issues as well as a very tough comp base. In the previous year, we grew by 44.6%, so clearly, we'll be able to accelerate momentum this year. Moving on to our rum portfolio. Also growing double digit, 15.5%, where Appleton Estate was positive, only up 3.2%. Bear in mind, there's a tough comp base of 31% in the previous year as well as the fact that we had a major price repositioning of Appleton in its largest market, Canada. Jamaica, the U.K., New Zealand and Mexico all doing -- performing very nicely. Wray & Nephew Overproof, where we have less capacity constraints as well, grew 23.2%, thanks to Jamaica and the U.S. SKYY, flattish, only down 1.8%. Clearly, negative results in the U.S. due to the competitivity of the category, but China as the on-premise was shut for most of the year. But we were able to mitigate this by very strong growth in the rest of the world, growing by 50.7%. And this is, I think, something which will be very positive this year as we'd expect the rest of the world to more than compensate any potential softness in the U.S. Moving on to our Regional Priorities. Clearly, Espolòn is going from strength to strength. And by the way, this is our third largest brand in the whole -- overall portfolio. Volumes, again, constrained for capacity reasons, which also impacted international rollouts but still growing 33.5%, accelerating in Q4. And I think as capacity will come on stream in the years to come, this is clearly destined to be one our key Global Priorities brands. The Italian specialties, up double digit, 13.9%. Again, very nice performance internationally, particularly in the U.S. and Austria, whilst Braulio is continuing to premiumize the amaro occasion in Italy. Frangelico grew double digits, thanks to the U.S. and to the espresso martini, and that's spilling over into Spain and Germany as well. Cynar growing double digits, thanks to Italy and its core markets, Argentina, the U.S. and Brazil. Moving on to our sparkling wines, Cinzano and the other ones. A positive performance thanks to France, so overall, we're up 13.5%. Mexico and Argentina helped as well as offset the declines in Germany and Italy, Spain and Australia, where we had glass constraint issues. It's nice to see that actually the vermouth is continuing to grow very nicely, particularly premiumizing as we go forward, both via the repositioning of the core, let's say, brand as well as the high-end. GlenGrant continuing to respond very nicely to premiumization, growing 20%. Again, key drivers here: Asia, South Korea and GTR. Aperol Spritz ready-to-enjoy, up only 35.1%. Clearly here, it is us actually constraining it. We're only allowing it to be launched in markets where we already have a satisfactory penetration of the Aperol Spritz cocktail, and this is only a convenience item. Magnum, which is flattish at 0.5%, could have actually grown really, really well this year. There's a lot of demand for the brand. Unfortunately, it was impacted by significant product availability issues during the year. Our other brands, again, performed quite nicely, particularly Bisquit & Dubouche, Montelobos, Ancho Reyes and Maison La Mauny. Moving on to Local Priorities. Campari Soda performing very nicely, up 6.1%. Our Wild Turkey RTD is finishing the year positively, 8%, but you remember that most of the year, the first 3 quarters was significantly in negative territory due to logistical issues which are hampering production and local bottling in Australia. Now X-Rated down 11.8%, and this is mostly due to the lockdowns in China, whilst South Korea continued to grow double digit. Our -- despite availability constraints, SKYY RTD, SKYY Blue, also in Mexico, was impacted and only grew by 3.8%. We could have easily have had double-digit growth on this. To close on our Local Priorities, Cabo, which is a local premium tequila in the U.S., up a very nice 21%. Moving on to business development initiatives. I'm not going to go into the details, but just to say that our RARE initiatives are proving very, very interesting. And whilst we kicked it off in the U.S., now we are spreading around the world and are particularly very impactful in Asia. And we're trying very different things and are able to really develop an interesting business with high-net-worth individuals across markets and push the opulent range of our key brands. Last and not least, before handing on to Paolo and the financial review, a few words on digital transformation where we're delivering significant business value through simplicity, innovation as well as technical leadership across our core functions. Marketing and commercial, clearly, the focus is on social listening, consumer engagement and influence. We have a very performing digital asset management platform, which also includes multi-access brand websites. Consumer relationship management, ICM, CBM systems for consumer relations, customer business management and bartender relations, so clearly, we're continuing to make a leapfrog in this area. In finance, we're proud to say that we had a very successful move to SAP S/4HANA. We're one of the few, I think, multinational companies have done that so far. The integration went quite well and is boosting our ability and the speed in business decision-making as well as harmonizing all our financial processes. Our global business services processes were optimized, and automation via AI technology is really ramping up nicely. We're also leveraging statistical algorithms as well as external data for integrated forecasting. Talking about integrated, on the supply chain digitalization, it's very positively impacted by integrated business planning as part of our finance transformation and the harmonization and the flexible planning. We're automating data collection and KPI monitoring, which is clearly helping efficiency in our plants, and have done a very good job in traceability, overhauling our abilities in this area by both stock visibility as well as from a quality tracking perspective. Last and -- but not least, we've enhanced significantly self-service capabilities as well as vendor collaboration. On IT, cybersecurity and HR, again here, we're making very, very good and strong progress. Our fully global and scalable IT support service model and have development of capabilities to speed up processes and enable remote connection, which is more and more important in the modern workplace. We've been deploying very well endpoint protection across all of our devices, and -- as well as the Acceptable Use Policy enforcement. So cybersecurity is a big area of focus for our teams. Last and -- but not least, we have an internal talent acquisition team at both our global and regional levels and a new HR operating model which is levering to the hilt digitalization. So this is it for the first part, and I'll pass on gladly to Paolo.

Thank you, Bob. If you follow me to Page 18, as you can see, the group delivered in fiscal year 2022 an EBIT-adjusted organic growth in value of 19.1%, with a 50-basis-point margin accretion, which was ahead of the flat margin guidance that we gave at the beginning of the year. Such performance was driven by a gross margin dilution, which has been contained to 120 basis points due to the strong cost inflation, particularly in glass and logistics, which was partly mitigated by the price increases. So actually, if you look at Q4, the gross margin dilution accounted to just 20 basis points driven by positive pricing initiatives, particularly those at the back end of Q3, which almost offset the cost inflation in the fourth quarter of the year. The A&P was up in the double digit, 12.7%, reflecting the sustained investments behind our brands but delivered an operating leverage of 60 basis points, thanks to a very robust top line growth of, as we saw before, 16.4% in existing business. The SG&A were up 10.6% in value, reflecting the continued investments in the business infrastructure as well as the expansion of our route-to-market and generated 110-basis-point margin accretion, again, thanks to the strong organic top line growth. The EBIT adjusted on a reported basis grew in value by 30.9%, including a tiny perimeter effect of 0.4%. So basically, the first time consolidation of Picon was almost offset by the termination of low-margin agency brands in Italy. And on the other hand, the overall result was positively impacted by the ForEx effect, which accounted for 11.5% or EUR 50 million, with an interesting 50-basis-point margin accretion driven by the strengthening of the U.S. dollar versus the euro in last year. On a reported basis, the EBITDA adjusted grew by 28.2%, of which 17.3% coming from existing business, 10.6% on ForEx and 0.3% from perimeter. If you follow me to the following page where we have the segment analysis, we can focus on the EBIT-adjusted organic margin performance. Starting with the largest region, Americas, where our group generated 46.2% of the overall group EBIT. The -- organically, the EBIT grew by 19.7% in value, with a margin accretion of 50 basis points coming from a gross margin dilution of 150 basis points mainly due to unfavorable geographic and product mix, the outperformance of both South America and Espolòn, which as we know at this stage is dilutive, as well as the COGS inflation, which were only partly offset by pricing. On the other hand, both A&P and SG&A were accretive by 90 and 110 basis points, respectively, thanks to the sustained top line growth of the Americas region. If we move on to SEMEA, where the group generates 17.8% of the overall group EBIT. In value, the EBIT grew by 43%, showing a quite healthy margin improvement of 230 basis points coming from a gross margin expansion of 20 basis points, driven by very favorable mix with the outperformance of aperitifs as well as very robust pricing actions, which more than offset the cost inflation in the region. Actually, both the A&P as well as the G&A were accretive by 20 and 190 basis points due to the strong top line growth, which drove operational leverage in the SEMEA region. Moving on to North, Central and Eastern Europe, where the group generated 33.5% of the overall EBIT. The EBIT performance was quite strong in value, a plus 11%, with a margin dilution of 130 basis points, which was totally driven by gross margin dilution of 190 basis points, impacted by COGS inflation as well as by unfavorable product and market mix, which were only partly offset by pricing. The A&P was slightly dilutive by 10 basis points, reflecting the accelerated investments behind our key brands. The SG&A, on the contrary, were accretive by 80 basis points driven by significant efficiencies on the back of the strong top line growth. In the smallest region, APAC, which accounts for 2.6% of the overall group EBIT, the performance in value was negative by 9.7%, with a margin dilution of 200 basis points coming from gross margin dilution of 270 basis points, driven by COGS inflation as well as logistics, which badly negatively impacted the regional P&L. The A&P spend was accretive by 200 basis points, mainly driven by the A&P phasing in China due to the COVID restrictions, which clearly prevented us from spending the A&P budget in China, whilst the SG&A were dilutive by 130 basis points, reflecting our continued investment in the route-to-market expansion in the region. If we move on to Page 20, we can see that the operating adjustments came in at EUR 58 million and were mainly attributable to transaction fees linked to acquisitions, provision linked to the Russia-Ukraine conflict, restructuring initiatives as well as long-term retention schemes. Net financial expenses and adjustments came in at EUR 30.7 million, with an increase of EUR 18.3 million versus a year ago, coming from nonrecurring -- 2 nonrecurring factors. The first one, we accounted for EUR 4.6 million of exchange losses. This is basically the seasonal impact of Argentina devaluation. And on the other hand, the negative financial adjustment of EUR 4.6 million that are tied to liability management initiatives that we took last year. Excluding those one-offs, the net financial expenses came in at EUR 21.4 million versus EUR 25 million of last year, recording a reduction of EUR 3.6 million versus a year ago. The average cost of net debt came in at 2.2%, showing an improvement of 30 basis points versus last year, thanks to higher interest income generated by the existing excess cash. The loss related to the associates and joint venture was EUR 6.6 million and was a noncash impairment of group assets. Profit before tax came in at EUR 475 million, up 22.2% in value. And on profit before tax adjusted, excluding nonrecurring effect of EUR 58.3 million in the operating camp and EUR 4.6 million in the financial camp, came in at EUR 538 million, up 29.5% in value versus a year ago. Now moving on to Page 21, we can see that the taxation in fiscal year 2022 totaled EUR 143.5 million on a reported basis, with recurring income taxes equal to EUR 151.6 million. Group net profit adjusted came in at EUR 387.8 million, up 26% in value versus a year ago, with the recurring tax rate at 28.2% in fiscal year '22, up 190 basis points versus a year ago due to unfavorable country mix. On the other hand, deferred taxes related to the amortization of goodwill and brands for tax purposes saw a step-up of EUR 2.1 million versus a year ago and came in at EUR 17.2 million in '22, on the back of the effect of the first-time consolidation of the Picon acquisition. Worth noting that in '23, we will have further positive effect due to the first-time consolidation of deferred taxes relating to Wilderness Trail Distillery. If we exclude the impact on noncash component, i.e., the deferred taxes, the recurring cash tax rate came in at 25% higher than fiscal year 2021 but due to, I said before, the adverse country mix. On a pro forma basis, the cash tax rate would have been 23.7% if we include the estimated full year deferred tax and P&L effect of both the Wilderness Trail Distillery acquisition as well as the Picon acquisition. The group net profit reported came in at EUR 333 million, up in value 16.9% versus a year ago. And the basic earnings per share on an adjusted basis came in at EUR 0.34 per share, up 26% versus a year ago. If you follow me to Page 22, we can see that on a recurring basis, the free cash flow came in at EUR 360.5 million, down EUR 47 million versus a year ago or down 11.5%. The key -- the big movers of that free cash flow reduction can be seen in an increase in EBITDA adjusted year-on-year of EUR 145 million from EUR 514.9 million to EUR 660 million. An increase in taxes paid of EUR 46.3 million from EUR 74 million to EUR 120 million, reflecting both the stronger business performance as well as the adverse phasing of tax payments with the settlement of prior year increasing taxes in fiscal year 2022. And then we have an adverse change in working capital of EUR 89 million year-on-year, positive EUR 5 million in '21 and negative EUR 84 million in '22. We then have the negative effect of -- sorry, the positive effect of the -- because they are noncash, of the hyperinflation accounting in Argentina for EUR 6.7 million. We have accruals and other changes from operating activities, which had a positive EUR 16.6 million effect this year. Interest paid has been contained by EUR 4.3 million and accounted for EUR 11.4 million in fiscal year 2022. Maintenance CapEx came in at EUR 107.5 million, up EUR 25.6 million versus a year ago. But as we will comment in a second, we also had extraordinary CapEx of EUR 105.8 million, mainly related to production capacity expansion on the 3 fronts of aperitif, bourbon and tequila. Looking at the free cash flow on EBITDA ratio, on EBITDA-adjusted ratio, we have a ratio of 54.6% in fiscal year 2022. If you move on to Page 20 -- 23 where we have the analysis of our CapEx for fiscal year '22 as well as the guidance for the upcoming 3 years. In '22, total CapEx accounted for EUR 213.3 million with, as seen before, maintenance CapEx of 107.5% (sic) [ EUR 107.5 million ] and about 4% of net sales in '22 which, looking forward, we expect to remain at the same level in terms of -- as a percentage of sales, 4% going forward. And on top of that, we have extraordinary CapEx of EUR 105.8 million in '22. And we're guiding now the market for the further extraordinary CapEx investment that is between EUR 550 million and EUR 600 million in years '23 to '25. Now this estimated overall extraordinary CapEx investment is clearly aimed at doubling the overall production capacity on our 3 growth pillars of aperitif, bourbon and tequila. And actually, as you can see below, we're extremely confident vis-à-vis the future prospects of these 3 pillars. Retrospectively, aperitifs, on a 3-year basis, delivered a cumulative organic growth in net sales of 63% or 17.7% CAGR. The bourbons, again, on a 3-year cumulative organic growth, were up 49%, with a CAGR of 14%. And our rising star, Espolòn in the tequila space, delivered a cumulative 3-year organic growth staggering of 134%, with a CAGR of almost 33% year after year. If you look at Page 24, a few comments on the operating working capital. As a percentage of sales, operating working capital came in at 28.6%, with an interesting improvement of 90 basis points versus a year ago. Organically, the overall increase in value was EUR 129 million, driven by EUR 83.9 million organic increase in operating working capital, EUR 29 million in perimeter, EUR 16 million from ForEx. If we focus on the organic performance, the EUR 84 million increase in organic working capital was primarily driven by a step-up in inventory, which accounted for EUR 208 million in absolute terms, of which EUR 60 million aging liquid step-up to support the future development of bourbon, cognac and rums. And then that was topped up with the step-up of other inventory, nonaging liquid inventory, which is driven, on one hand, by the positive business performance and the planned inventory buildup to support a strong customer demand in the context of possible supply constraints. So we're creating a little bit of stock to make our life easier in 2023. We then had an increase in receivable for EUR 14.4 million and a significant increase in payable of EUR 138.7 million, which was due to different factors. On one hand, we have a higher level of purchase in connection with inventory buildup that I just commented. And of course, there is the inflation effect that has an impact on operating working capital, two. And thirdly, we have CapEx payment phasing. Given the step-up on CapEx, we -- normally, we have an increase in payables. On a pro forma basis, operating working capital on net sales ratio came in at 28%, adjusted for the pro forma effects of the recent acquisitions. If we move on to Page 25 on the group indebtedness, the net financial indebtedness came in at EUR 1.552 billion. This is the back end of last year, up EUR 721 million. On the back of positive robust recurring free cash flow of EUR 360 million, EUR 188.7 million on a reported basis which, on the other hand, was more than offset by acquisitions and asset deals amounting to EUR 732.9 million. Worth highlighting in the footnote, the 2 key components of that EUR 732 million acquisition outlay, which were the Wilderness Trail, which has been fully factored in our balance sheet. That totals EUR 565 million, including the cash outlay of EUR 394 million plus the put option on the minority stake, the 30% of EUR 171 million. And the second component is the acquisition of Picon for EUR 124 million. On top of that, in terms of cash outlays, net purchase of own shares of -- for EUR 121 million. And of course, the dividend payment at EUR 67.6 million. Looking at our long-term Eurobonds and term loan overall, including the term loan completed to finance the Wilderness Trail Distillery acquisition, the size of the long-term debt exposure is EUR 1.494 billion, with an average nominal coupon on such indebtedness of 2.5%. The ratio of net debt to EBITDA adjusted stood at 2.4x at the back end of last year. But on a pro forma basis, including the effect of the recent acquisition, would be 2.2x, was clear an increase from 1.6x as of the back end of last year due to higher net debt and the acquisitions that we will finalize. I think I'm done with the numbers. I would happily hand back to you, Bob, to give us some color on the very positive achievements in the sustainability camp.

Thank you, Paolo. And indeed, we would like to spend some time with the -- underlining the key highlights of our achievements in 2022. We have 3 pillars on which we focus: The environment, responsible practices and people and community. Starting on with the environment. We're very proud to underline the fact that the Carbon Disclosure Project gave us a score of B for climate change, so that is very, very good. We've also disclosed our Scope 3 emissions, working this year on the plan to actually reduce these significantly and reach our long-term commitments, obviously with the help of our supplier partners. And if you look at specific data, our greenhouse gas emissions were down by 47%. These were reduced on a CO2 per liter produced, and this is from direct operations. We set these targets and they were ambitious targets for 2030, but clearly, our teams are working very focused on that as we're moving to both in Europe and in the U.S., we moved to renewable energy. Our GHG absolute emissions where other reduced by 20% on an absolute basis, taking into account all the big production increased by 20% versus 2019. Like-for-like, water usage has come down by 48%. Again, here, we were able to achieve 7 years ahead of time our 2030 targets. And importantly also, waste to landfill is down by 45%, and we're on track to deliver the 2025 target, which is basically 0 waste to landfill. On responsible practices, we're doing quite a bit in terms of mandatory training on our new revised Code on Commercial Communication. We're expanding the digital brand campaigns on responsible drinking, highly targeted, obviously, to younger groups. A specific section on our camparigroup.info is dedicated to provide consumers with nutritional information, ingredients and messages of responsible drinking. And last but not least, we're working very intensively with the bartenders community via a specific program called Bartender Hero, which is launched in partnership with International Bartenders Association. On people and community, I would like to highlight the fact that we have significant increase in learning activity, so more than doubling, up 109%. Very satisfactory participation rate to our biannual employee survey, 91% participation. So that clearly shows very, very high engagement by our Camparistas. We're also very proud to have been included by Refinitv into the Top -- World Top 60 out of, I think, 12,000 international companies. We're in the top 60 companies when it comes to diversity and inclusion. We have a strong commitment to work, education and culture, and we have many projects across different geographies. And last but not least, we're providing strong support to business partners for activation and events. At this stage, that -- last but not least, conclusion and outlook. I think the extensive full year results presentation shows what strong organic performance was achieved in a very challenging 2022, thanks to very healthy brand momentum which enabled us to generate price increases, which help mitigate the heightened COGS inflation over the year. Clearly, the overall performance benefited from a strong FX effect thanks to the U.S. dollar, and we would expect this to be different this year. Looking at 2023, we remain quite confident about the very positive business momentum across our key brands and markets, which will continue to benefit from strong brand equity. And here, clearly, what differentiates us from many of our peers is our highly-attractive aperitifs portfolio. We expect to continue leveraging adequate price increase opportunities, and will take clearly more price on our aperitifs as well as continue driving our portfolio premiumization, and this mostly around our brown spirits brands. The overall macro environment for inflation, we think, will remain challenging despite some signs of easing at the beginning of this year. Nonetheless though, we remain quite confident to be able to preserve the current operating margin on sales at the organic level throughout this year. However, in the medium term, looking beyond 2023, we aim to accelerate our medium-term CapEx across the supply chain to overall double capacity for aperitifs, bourbon and tequila., And clearly, this underlines our confidence in our future prospects, and we remain confident to continue delivering strong organic top line growth as well as mix improvement, which will lead to margin expansion over time. So this is this from us, and I'm sure you got tons of questions. So happy to take them.

This is the Chorus Call conference operator. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Andrea Pistacchi of Bank of America.

Three questions, please. The first one, I mean, Q4 was strong across the board, but Italy was a little softer or slightly negative. You called out the glass supply issue affecting Cinzano and the comps. So will the supply constraint issue continue to impact in 2023? And leaving that aside, how do you see the health of the various channels in Italy, including the day bars? Second question on -- still on top line, but broader, you've delivered 40% organic sales over 3 years, as you're saying, well above any consumer staples company in Europe. Strong momentum of your brand. How are you feeling as we go into 2023 with a more difficult environment, the comps you face about top line momentum and the very high single-digit growth that you delivered in Q4? Do you see this as a normalized or a kind of new normal rate of growth, or was Q4 still affected, would you say, by comp effects phasing? And the last 1 for Paolo. Paolo, could you say please what you're anticipating for COGS this year, giving maybe a bit of color kind on what you're expecting on logistics costs and glass sort of as the year progresses?

Yes. Andrea, let me kick off with Italy. Q4 softer. Clearly, it was impacted by the glass impact. And also, some of our aperitif brands were on allocation as there was strong demand globally. You also need to understand that we took a second significant price increase in August, so there's a little bit of a phasing effect which impacted Q4. Overall, we're seeing very good trading across all of our channels in Italy. The on-premise remains quite vibrant, and you know that it's about 60% of our sales in this country. We've had a very good start of the year, and we expect that to continue for the rest of the year. Clearly, the 1 incognita will be is that we are going to be as good as last year, but they're in the hands of somebody more, let's say, important than me. Moving on to the 40% organic in 3 years, now, how do we feel about [ 2030 ]? We actually feel very, very good about our portfolio and the growth prospects and the momentum behind our brands. Clearly, markets are normalizing, but we expect to outperform with our brands in all of our key markets, so we expect very good momentum to go forward. Now will it be the figure we had in Q4, which, as I explained earlier, was impacted. But could it be better? We will do our best. I think the environment is what it is. The most important thing is that our 3 key clusters which is aperitifs, bourbon and tequila, are in very much high demand and we're continuing to take very nice market share across all those categories and markets.

Yes. With regards to the COGS, that for us, as a percentage of sales, they account for about -- and also 40%, 41% about the -- the total cost as a percentage of the total cost, 55% to 60% linked to lower packaging materials. Within this 55% to 60% of total cost bucket, a good 70% is represented by the cost of glass, so a significant portion of our overall cost. Then, of course, logistics is the other area which has been highly impacted. It's about 15% of the overall total cost. Then of course, you have production costs that accounts for 25%, and then a minute portion of COGS is represented by agents. Now clearly, the components are the most exposed to oil and gas prices, our glass, logistics but also our coal and utilities. So for this year, clearly, we're expecting inflation to persist, to remain, and this is why we're quite aggressive on pricing at this stage. As we clearly intend to at least offsetting value the COGS inflation and potentially to do better. Clearly, the guidance that we're giving at this stage the beginning of the year, given the fact that there is some volatility on both fronts, inflation and the trade negotiation, it's for -- we're guiding for a flat EBIT margin as we did last year. And we would intend to review that guidance halfway through in July as we disclosed the first half results.

Can I just -- 2 quick follow-ups on this. On glass, is it right that your glass contracts have a partial sort of indexation every, I think, every 3 months or something to energy? And also on logistics costs, are you starting to see any easing there, or is that what you'd expect later in the year?

Yes. We believe in -- I think it's more a matter of when than a matter of ease, in terms of costs easing. As you see in our medium to long-term guidance, we're quite confident with the vision of 2024 onwards. In terms of benefiting from retrenching of inflation, given also the price increase that we're taking or we took last year and we will take this year. The phasing is a little bit -- in 2023, a little bit more uncertain, if you will. Because clearly, as you correctly mentioned, the contract on glass by at least 30% of it, they are indexed to oil and gas prices. Clearly, there are hedging contracts in place, which might be a little bit more slowed down, the reduction of the cost, but nothing meaningful. I think perspective, we feel quite confident. We just need to navigate quarter-by-quarter, so with the 2023 year. But I think at this stage, this is what we can say. A little bit more positive on the midterm.

The next question is from Simon Hales of Citi.

Could I just follow up really on that margin debate you were just sort of having. How do I think about the margin evolution overall for 2023 in terms of sort of H1 versus H2? Obviously, you're guiding to flat margins for the year. It sounds like clearly, given the way some of your hedging is working, given the supply constraints you have, H1's clearly going to be tougher than H2. But at the same time, looking at the Q4 gross margin delivery that you called out, clearly only down 20 basis points, but pricing is really starting to kick in that you took in August into early September now. I'm just trying to sort of piece together all the moving parts that drive you just to sort of only guide to flat margins at this point? And secondly, can I just ask you a little bit more about the CapEx plans sort of going forward? Obviously, clearly a big step-up coming over the next sort of 2 to 3 years in expansionary CapEx. How will that phase should we broadly assume we're going to move to EUR 50 million to EUR 100 million of expansionary CapEx, or is it a bit more back-end or front-end loaded? And what sort of programs specifically will you be investing in really in 2023?

Yes. With regards to slight EBIT margin, at the moment, we believe in full year -- the landing for the full year. No major risk in [ 80 ] percentage of sales. And basically, the robust operating leverage that we have achieved in 2022 probably will not -- in SG&A will not be any longer there. So again, given also the investment in infrastructure and [ after market ] expansion that we have launched, we think that the SG&A will increase in value at a mid-single-digit rate. So we're not expecting any meaningful swing across the different profit levels, gross margin, comp and EBIT at this stage. Clearly, the phasing of it, as we saw last year, the area of the portfolio where we are most exposed to inflation is the aperitifs. Due to the player data the vast majority of the [ bill ] of aperitifs is due to glass and [ coals ] that has been bought in current year, as opposed to the brown spirits that they have a skewing clearly in Q4, where basically, most of the middle of the material is composed of aging liquid that has been laid down, distilled and laid down 3, 4, 10, 12 years ago. So this is why you see in Q4 a bounce back of dilution that is -- that reflects the different sales mix of Q4 versus the Q2 and Q3. So for next year, again, we expect probably that the same pattern will be reflected in next year. Clearly, that also depends on the trajectory of inflation, so that's the area where we were a little bit more, in terms of pacing, a little bit more cautious and prudent. With regards to the CapEx, yes. No, I think it would be a little bit more front-loaded. So it will not be 2020, 2023, we will have probably EUR 100 million, about EUR 200 million CapEx sitting in 2023.

Got it. That's really helpful. Can I just sort of just follow up on just hitting on the whole pricing issue. Obviously, you took pricing end of Q3 or Q4. Have you taken any more pricing as yet as we move into 2023 or announced any price increase to the trade, or are we still waiting for those?

Well, currently, we're in discussions with the trade. We're in commercial negotiations and the price increases, depending on the market, will be between Q1 and Q2 of our major markets. Most of them moved in Q1 and then Q2, we'll have Italy and the U.K. But we obviously cannot go into detail as we're having discussions as we speak.

The next question is from Laurence Whyatt of Barclays. .

A few from me, please. Firstly, just following on, on these questions on pricing. It does seem like many of the staples companies and beverages, in particular, are increasing prices quite materially over the next few months. Are you seeing any impact from the consumer with regard to any elasticity or any volume weakness or any trading down? Just be very interested on your thoughts there, particularly for the European consumer. Secondly, it does seem -- we've seen a lot of success in your aperitif brands and the tequila, But SKYY does seem to have taken a bit of a backseat in your portfolio. It used to be 1 of the largest brands there, now it's only about 5% of sales. Where do you see the future of your vodka brand? Is it something that you can return to growth at some stage, or do you see it more as a sort of bastion brand in the portfolio that's almost done its job in yesteryear? And then finally, just in terms of the phasing of the quarters, as we're thinking about our modeling. Do you anticipate any major changes or any extreme events or any strange factors that might impact sort of quarterly volatility? Anything to call out this year, or how do you see the phasing of the quarters this year?

Laurence, I'll take the first 2 questions. I mean, have we seen any impact from pricing on our brand? Well, frankly, not really majorly, I mean, we haven't seen -- you've seen the full year results and how the brands are trending in 2022. Particularly, we're very pleased on how the Campari brand reacted with major price repositioning in Europe. And if I look at the beginning of this year, again, we're not seeing any impact. We're not seeing any consumer switching to less premium brands or switching channels, I think, for the time being. Touch wood, things are looking pretty good. Moving on to SKYY and what is the future of SKYY and vodka. I mean, clearly, vodka is a very large category globally, so we expect to continue to be a major player in that area. I think what you'll see over time is clearly helped by very strong growth internationally, SKYY returning to growth overall. We think the U.S. will remain a challenge because it's a very challenging category. Having said that, we're quite happy that in 2022, it was the first time in 15 years that we took pricing on SKYY and it's stuck. And that's a good sign, I think, on the health of brand equity, and the impact of the relaunch and the premiumization of the brand. So SKYY will continue to remain important, but you are going to have to be more patient. But the bigger impact is going to come in the short to midterm from international markets as opposed to the U.S. market.

Vis-a-vis the phasing of results, we think the start of the year has been positive. We have a robust top line growth. So it's, I would say, fairly plain sailing at the beginning of the year. And as the input cost pressure would ease in the second part of the year, we'll see the benefit in gross margin as a percentage of sales at the back end of the year. So the 2 things move in opposite potential and opposite direction, but the start of the year is positive.

The next question is from Mitch Collett of Deutsche Bank.

So a couple of questions from me, please. Firstly, on pricing. I know you said at Q3 that some of the price increases you've been taking hadn't been passed on by retailers. Are you starting to see that now? Secondly, you obviously had some supply constraints this year. Can you maybe comment on where inventories are versus normal at the end of 2022? And then just to come back to the CapEx plans, I guess, doubling your capacity for those key products across 3 years would imply 20% to 30% growth is your expectation? I mean, is there anything wrong with that as an assumption, and can you maybe comment on when the new capacity will actually come on stream?

Yes. Let me take the first 2 questions. I mean to clarify on pricing, actually, retailers passed on the price to consumers already in -- at the beginning of Q4, and we haven't seen much of an impact from it, to be honest. Now, with the supply constraints and inventories. Clearly, on brown spirits and tequila, we continue to be constrained. The situation on tequila will improve in the second half of the year. On brown spirits, you'll have to wait, I think, 5 to 10 years for the additional capacities to come on stream. Having said that, on brown spirits, we're clearly premiumizing our offerings and accelerating growth that way. On aperitifs, this year, we're able to go for a short-term fixed via third-party contractors. And then next year, the full on capacity will kick in. So both this year and next year, we won't face much constraints on the core aperitifs categories. With regards to inventories, our inventories still remain pretty, pretty low. I mean, the 1 thing we're happy about is at a certain point last year in the U.S. mid-year, we only had 7 days of inventory cover on tequila in the U.S. Clearly, we brought that to a more normal and healthy level. Having said that, inventories continue to remain low across the globe.

Got it. And following up, sorry. Carry on.

No, Mitch. You go ahead.

I was just going to say, you've already commented, Paolo, on freight rates coming down. I think at 1 point last year, you were using airfreight. Can you confirm that you're not using airfreight anymore, and that should potentially be a tailwind?

Yes, that's a tailwind so far. Yes. And with regards to your last question, is doubling capacity. So basically, we've assumed that the current brand trajectory is confirming the future because no, we're not seeing any slowdown in business momentum. And so this is why we've highlighted the 3 accumulative organic growth and the CAGR category by category. So that's the base case assumption sitting behind the CapEx plan.

The next question is from Edward Mundy of Jefferies.

I'd love to drill into Slide 8, where you showed the pickup in the consumption of Aperol and the long runway still to go. And clearly, we probably don't want to benchmark to Italy, but if we do a benchmark to Germany per caps, adds about EUR 1 billion to supply sales for Aperol, which is current about EUR 600 million or so. But the U.S. is the biggest driver of upside, so I'd love to sort of really drill into the U.S. opportunity. And sort of when do you expect to see a tipping point within the U.S., I guess is the first question? And then second of all, I guess 1 of the things about the U.S. that is slightly different to the European markets. Is that -- I guess not as many American consumers go to Italy on holiday compared to Austria and Germany. And also, there isn't such a prevalence of cheap Prosecco or cheap sparkling wine relative to the U.S. So could you perhaps sort of touch on those points I guess, as a first question? And then second question is a quick technicality one. Just on the finance costs, which had some one-off items, non-exchange gains and financial adjustments. Paolo, would you'd be able to sort of comment on how those might look for 2023?

Clearly, you highlighted 1 of our largest opportunities, which is Aperol in the U.S. I mean, the U.S. on a value basis, is our third largest market. It's growing at 50%, but the PCC is still at 0.01%. Now we expect to maintain a very robust growth rate in the U.S. And actually, this year, we're going to high up our marketing and activation spending, taking it to a much, much larger scale by 2 significant events, which I'd rather share in the second half of the year with you guys. So clearly, it's an area of focus, and we really don't see any issue in terms of availability of cheap Prosecco. And as for the -- when our American tourists are going to a holiday, yes, clearly, I mean, Italy was full of American tourists last year. But beyond that, what is happening is that Italy bring -- brought to the U.S. I mean, if you look at White Lotus, which is a key Netflix TV series, you'll see so many orange glasses, the Aperol perfect serve throughout every single show that clearly, that is having an impact. We feel very good, and we expect to see a very nice acceleration in the U.S. this year. And we're going to continue on this because clearly, it's highly profitable. But we will do it following our growth model and focusing on specific areas, and making sure that brand is deeply penetrated there before moving on to other areas.

With regards to the financial expenses for 2023. Clearly, at this stage, we do not have any visibility of any non-recurring, call it, one-off, think it positive or negative. As we showed in 2021, we had a positive EUR 12.6 million in financial one-offs, and this time around in 2022, we had negative -- more than negative EUR 9.2 million, so this is [ 2022 ]. So our base case for the time being is 0. On that line wise, on the true and pure net financial expenses, we're currently expecting about EUR 45 million in '23, given the increase in the [ maintenance ] following the acquisitions and all the cash outlays that we've explained during the call. So EUR 45 million is the target on the financial expenses for this year.

Very clear. And Bob, can I just perhaps just follow up on the point that you're a much bigger company. Today, you're 40% bigger than where you were pre-pandemic. And that's given much more, I guess, oxygen for marketing investment. You're obviously spent more on CapEx. But what are some of the other things that this much bigger base is allowing you to do, perhaps accelerate some of your digital transformation programs? What sort of optionality has been opened up by being so much bigger than where you were, I guess, pre-pandemic?

Well, clearly, our digital agenda has accelerated, and that is giving us much faster and deeper insights into the business, which also enables us to put all sorts of AI to help accelerate things. Clearly, we're accelerating also. We've built quite a bit of route-to-market capacity in Asia, which I think is going to become very meaningful in the years to come. There's a few more opportunities in Europe. And clearly, we're a talent magnet, and that is reflected in the results.

The next question is from Trevor Stirling of Bernstein.

Bob and Paolo. Three questions from my side, please. First one, Q4, you highlighted quite a few supply constraints on sparkling wine and the aperitifs. So I wondered, Paolo, maybe if you could estimate what would Q4 organic sales growth have been if you'd have no supply constraints? Second one, as you're talking through the puts and takes of next year, it sounds like top line and operating leverage on SG&A is 1 of the big variables. If you grew at top -- so at high single digits, if you kept growing at high single digits, would you expect that operating leverage? Is that your guidance of -- or your expectation of flat based on mid-single-digit growth? So maybe a little bit around the sensitivities there. And then finally, on tax and a technical one, Paolo, you highlighted that cash tax on a pro forma basis is quite a lot lower next year because of Wilderness Trail, Picon, et cetera. If you look at the headline tax rate of 28%, is that also going to be lower on a pro forma basis next year?

I'm going to do some guessing here, Trevor. But I mean, in Q4, hadn't we had the constraints across the business as well as some logistics issues, et cetera. Our growth rate on a quarterly basis would have been probably somewhere between 15% and 20% greater than what it was.

Yes. With regards to -- Sorry, Trevor.

No, no. Absolutely. So that's implying -- 1.5 to 2 percentage points greater basis points?

Yes.

Super.

Yes. With regards to the operating margin guidance, it is clearly based on the assumption, we deliver a twice single-digit top line growth. If we managed to accelerate the top line, clearly as we saw last year, we would capture operating margin expansion driven by -- we still believe primarily sitting in the SG&A line. More than cost of goods, given still the current volatility of inflation environment. With regards to the cash tax rate, yes, it is correct. So we're guiding towards about 24% cash tax rate for next year, whilst the direct -- the recurring tax rate is definitely remain at 20% because what is really increasing is the amount of deferred taxes. It is to the fact that the first time consolidation of [indiscernible] is leading to an increase of the deferred tax rate effect.

The next question is from Paola Carboni of Equita SIM.

Everybody, Bob and Paolo. I have a few questions. First of all, if you can comment that -- you already did it extensively about Europe, but if you can comment also on the final demand -- the trend in final demand that you are seeing for the U.S. market? Secondly, in terms of cost of goods sold, if you can elaborate a bit on the cost of glass? If you can give us a sense of how much of delta you would suffer compared to the Q4 level, compared to what you -- so in Q4, and what's the spot you are paying now for the cost of glass? Or if -- I mean, to what extent are you expecting an inflation compared to your Q4 cost of glass? And also, if you can mention something about agave. We are talking about that for a while. I assume it has stabilized, or maybe it's finally the moment of having a little bit of deflation here at some point in the year. And last question, sorry, is about the non-recurring charges you posted on 2022. You mentioned also some restructuring initiatives. I would appreciate if you can elaborate a bit on that, and if you expect this to continue with some project specifically in 2023?

Let me quickly take the first one, Paola. I mean, final demand in the U.S. market in Q4, I think it's fair to say that September and part of October, the market was a little bit soft, but December was definitely quite robust. And if you look at our portfolio and our core brands which are more skewed towards, on the 1 hand, the on-premise, which is very vibrant in the U.S. As well as if you look at the off-premise channel, we're more skewed towards liquor stores, which Nielsen doesn't read or read, but most analysts and banks that do not actually buy that data, we're actually doing quite nicely across the portfolio. With clearly key drivers being bourbon, aperitifs and tequila.

So with regards to the cost of glass, yes, we can confirm, Paola can confirm that the context is a context where the cost of glass is still on a rising more. Clearly, you're comparing the average cost of glass for 2022 versus the increased cost of glass of the beginning '23, so it's still growing. And we believe as the time goes by, this cost component design to energy cost testing to come down. So it will be most likely second half of '23 and beginning of '24. While on the agave, becoming a much more positive than before because we're seeing on the liquid inventory sitting in Mexico and the amount of plants coming to market, growing and growing. So we believe this is an area of potential in the second part of the year. We might have opportunities. Clearly, at this stage, it is stable. But for example, we start having access to incremental amount of agave plants, which bodes well for the development of Espolon, which last year has been constrained due to capacity -- production capacity, which is now being fixed, but also access to our agave plants. So there is a positive on 2 fronts. Potentially, back end of the year, some minor improvement on the agave. And secondly, incremental available product for the U.S. market on Espolon. The restructuring initiatives, we keep on doing the diligent work of finding any potential efficiency within the group. At this stage for 2023, we're not envisaging any meaningful costs sitting in restructuring initiatives.

The next question is from Alessandro Tortora of Mediobanca.

Everybody. I have 2 questions, if I may. The first 1 is on the contribution of the, let's say, the last acquisition of Wilderness Trail? If you can comment a little bit on the change perimeter effect?

I'm sorry about -- we didn't hear the question. It's not very clear.

Okay. So the first question is on the, let's say, the last acquisition, okay, you made. If you can comment a little bit on the Wilderness Trail contribution? Let's say, if you see, let's say, certain guidance on the EBIT margin side of the change to [indiscernible] including the Wilderness Trail Distillery? The second question is on the, let's say, trade working capital, let's say, net working capital. If you can give us any idea of the ongoing trend also for this network, considering that now you should have an increasing level of, let's say, hedging liquidity and therefore, some indication of where you see this indicator?

Yes. With regards to the contribution of perimeter for 2023, which is basically Wilderness Trail or else the Picon, the Del Professore acquisition. In total, we're expecting about EUR 70 million contribution to the top line. And EBIT contribution, EBIT margin of about 35% to 40% of those -- of that EUR 70 million contribution to the top line. Clearly, the Wilderness Trail contribution has been in terms of revenues, and EBIT has been partly reduced vis-a-vis pre-acquisition because we're putting aside, we're laying down aging liquid to support the development of our own bourbon brands, American and the like, in view of the increase of the business in future years. So we're not actually selling entirely the distillate to third party, and we are keeping a portion of it for ourselves to support the development of our own bourbon in the future. This is clearly -- we do see the short-term contribution of the acquisition. But of course, given the huge arbitrage between an internal cost of production of bourbon and the cost of buying that liquid from third party, it's wise -- from a cash flow perspective, it's wise to lay down stocks for our own portfolio. Yes. And the second 1 on operating working capital, the lending on last year was 28% of revenues. Clearly, if you look at the average for the period of '20 to '22, so the -- it was at 31%. Clearly, given pressure on availability of raw materials, we've run down stocks to the bare minimum, excluding aging liquid where we were backing up our aging liquid inventory levels. So for future years, we think we should get back to the 31% of net sales, that is the level where you maximize your chances of having very good service level to the market, so with all deliveries in full and on time. So when you work with a tiny stock levels in the context of constrained logistics environment, it is when you create a low level of service and potentially out of stock, as we head along 2022 in certain geographies selectively on certain brands.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Thank you very much. Thanks for joining us, and we look forward to taking this conversation to other venues with all of you. Thank you very much. Bye-bye.

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