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

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group First Half 2026 Financial Results Conference Call. [Operator Instructions] Today's call will be hosted by Simon Hunt, Chief Executive Officer; and Francesco Mele, Chief Financial Officer. At this time, I would like to turn the conference over to Simon Hunt. Please go ahead.

Great. Thanks very much. Good afternoon, everyone. A pleasure to be here with you again. I've got Francesco with me. And as of course, we have our IR team will be available after the call for any follow-ups. So let's get going with a summary of our first half results. I think it's important to start by stating that we are doing exactly what we said we would do, and we are growing in the important start to the peak season. In fact, we are the only listed spirits player now with 5 consecutive quarters of organic top line growth. Now overall, in H1, we recorded plus 2.7% organic top line growth with Q2 at plus 2.5% despite a more difficult comparison base. At the same time, we continue to outperform and gain share across all of our key markets in sell-out, especially on our priority brands. In fact, we are gaining share in 95% of our markets. Now I know you've all heard this a few times, but I think it's worth to reiterate our strategy that we shared at our CMD back in November because that is exactly what we are doing. So first, we talked about sharper portfolio choices with fewer bigger bets. We're doubling down on the key priority brands and the results on the sell-out are clear with solid share gains across regions and especially in the strategic on-premise. Second, winning the first shared drink every day everywhere with new formats for new occasions. Following our recent new format launches on our aperitifs, we are seeing very strong initial results with positive feedback from consumers and trade and encouraging velocity and distribution gains. Third, accelerating our geographic expansion. In the first half, we recorded broad-based growth with expansion into smaller seeding markets by increasing our exposure to these high-growth markets where we under-index and also with the rollout of priority brands into new markets, like Sarti Rosa in the U.S. right in time for the summer season. And the final 2, leveraging our investments to work harder and driving efficiency across each line of the P&L, allowing us to invest more behind our brands. Now as you can see on the page, we strengthened our gross margin profile by 130 bps accretion, mainly driven by positive mix due to the performance of aperitifs, as well as input cost benefit and lower tariff impact. And Francesco is going to go into that in a lot more detail later on. Our brand-building investments continued at pace into the peak season and front-loaded in the first half in absolute terms as we guided. In fact, we are deploying one of the most comprehensive coverages across music festivals and other events, both with our existing products as well as our new innovations this year. Our cost containment program continues to deliver, and we are on track to achieve 70 bps organic SG&A benefit on top line as guided with an H1 delivery of 60 bps. As a result, we achieved 130 bps EBIT adjusted margin accretion. Although the underlying trends on the main contributors to EBIT have not changed, we are raising our margin expectation for the full year due to a more favorable-than-expected tariff impact. Again, more details on this later in the presentation. On the balance sheet side, we remain comfortable and at sustainable levels. We recorded 64% recurring free cash flow conversion before operating working capital changes and total recurring conversion was impacted by seasonality. Our distillery expansion in Kentucky is progressing as planned and on track to be finalized by the end of the year. Our leverage is comfortable at 2.6x, supported by business momentum with some impact of seasonality in operating working capital. At the same time, we are continuing to streamline our portfolio with new disposals of the rhum Agricole business, including Trois Rivieres, Maison La Mauny, as well as Bisquit & Dubouche and Cabo Wabo. As I'm sure you will have seen, we also recently successfully closed a new Eurobond issuance of EUR 600 million and a liability management transaction, which allow us to feel comfortable regarding the maturity profile of our funding base. So now let's delve into some of the details, starting with the top line. As you can see, the first half organic top line growth of plus 2.7% was broad-based across all regions and most houses again. In terms of FX, the main impact is coming from the U.S. dollar, while the perimeter impact is in line with what we previously told you and mainly driven by the disposal of Cinzano and 1 month impact of Averna. We'll go one by one, but first, let's look at sell-out, which, as you know, is the critical indicator. So far in '26, year-to-date, we have recorded outperformance and share gains across all of our key markets. With aperitifs brands, we are growing everywhere, in most cases with mid-single to low double-digit growth. In the U.S., we are outperforming in all channels, especially in NABCA and the strategic on-premise, where the share gains are even more evident. In Europe, again, we have an outperformance across the board. Total Europe sell-out data includes 12 countries. And you can see we are growing plus 2% compared to the sector decline of negative 1%. And in the on-premise, which you don't see on the page, the outperformance is even more pronounced. Now as I said upfront, we are gaining share in every one of our markets. And I think with all the noise in the category, CEO changes and significant restructures, merger speculation and consumer pressure, we at Campari are growing. And we are growing share because we have a clear differentiated strategy, and we are executing it without distractions. So now let's move on to Europe top line. Europe delivered plus 1.9% organic growth in the first half with growth across all markets, except Germany. In fact, Europe growth is plus 2.9%, excluding Germany, where the consumer pressure is most evident. This growth was driven by Aperitif portfolio strategy with contribution from all of our key brands. Innovations also started playing a more meaningful role as part of our convenience strategy. And altogether, we are implementing the biggest ever activation plan in Europe in terms of days of activation, menu placements and festivals. In Italy, we saw continued growth for our Aperitif portfolio led by strong execution on innovations, notably Aperol on Tap and Campari Spritz ready-to-serve, which hit shelves at the beginning of Q2. In addition, we are executing 4,700 activations during the peak season, especially into Q3, and we already have Aperol on Tap in more than 1,000 outlets, including festivals, events but also new outlets like pizza restaurants. Aperol's performance is further supported by the rollout of our [indiscernible] campaign, which is reinforcing our leadership in the on-trade with almost 500 outlets already proudly displaying the certification bags that they proudly serve Aperol. As I mentioned, Germany continues to see a challenging backdrop with subdued consumer confidence and wallet pressure impacting numerous consumer sectors. Now despite this backdrop, Sarti Rosa's performance remains strong, and we've seen strong execution behind Crodino and the early success of our innovation rollout, including Campari Spritz ready to serve and Aperol on Tap. The environment going forward is expected to continue to be challenging, but we will continue to expand our presence and activate behind our key brands in preparation of the market recovery. In France, the Aperitif portfolio is performing strongly with high single-digit growth, partially offset by the local portfolio. Aperol continues to lead that performance and Sarti Rosa has also started to gain traction following its launch last year. The U.K. had a strong first half with plus 4.3% growth, once again led by double-digit growth in our Aperitif portfolio with contribution from Aperol, Campari, Sarti Rosa and Crodino. There's also strong early traction for the Aperol to Go can with ongoing distribution gains and velocity at 3x our original targets. At the BST Festival in Hyde Park over a 2-week period, we sold 65,000 cans of Aperol Spritz in a format that we wouldn't be able to do previously. And Aperol on Tap will also progressively be rolled out over the summer. And other European markets, representing about 12% of overall sales, we saw broad-based growth of plus 5.5% across most countries, especially in Spain, Austria, Greece and Benelux. Having just been to both Spain and Greece, I can tell you the potential for our portfolio there is really exciting. And the bulk of the growth is coming from Aperol, Sarti Rosa, Crodino and sparkling wine to support the aperitif trend as well as solid performance on Courvoisier. Now moving to North America, we recorded a plus 2.6% organic growth with all markets growing. The U.S. recorded a plus 1.5% organic growth, driven by our priority brands, Aperol and Espolon, especially with strong on-trade performances. Aperol saw solid growth, showing the early benefits of increased investments behind the brand, including an amplified presence at Coachella and the 21 new brand activators in the on-premise across the 4 states are really driving the business. In fact, the accounts that they are covering, we are seeing 4x the velocity of the accounts that they are not covering. In July, we started a campaign with Hillary Duff to sponsor her concert tour, which is further amplifying visibility into the third quarter. Another important development in the U.S. is the June launch of Sarti Rosa. Although it's very early days, we are seeing strong pickup with most locations limiting consumers to a maximum of a 1 or 2 bottle purchase, and we're already seeing people come back for reorders. TikTok is leading the social media buzz on this brand, accounting for 41% of the coverage, which is an encouraging signal that the brand is resonating with legal purchase age trend-driven consumers. Espolon also continues to perform well with high single-digit growth, both in Blanco and Repo. Also here, we continue to activate behind the brand with the short King Week campaign featuring Ken Jeong and activations during the World Cup with a series of watching block parties. Commercially, we placed Espolon in over 7,000 menus, double our original target with similar success also in off-premise displays. And we'll talk more about the performance later in the day. Moving to Jamaica, we recorded plus 8.8% growth with benefit from the faster hurricane recovery as well as pricing coming through in the market. For the rest of the region, all countries registered solid growth, including Mexico, which recovered the quarter 1 phasing impact that we mentioned previously. So now let's have a look at the developing markets. As a reminder, we formed this region at the beginning of the year in order to become more agile and benefit from a repeatable playbook across some of our seeding markets. In the first half, we started to see some of the benefits of this increased focus with widespread organic growth of plus 9.1%. Brazil saw continued momentum of Aperol and local brands, partially offset Campari phasing into the next quarter. Argentina benefited from the ongoing strength of SKYY Cosmic. And since the launch of SKYY Cosmic was in June last year, we do expect the growth rate to normalize in the second half. In the other countries, one of the key drivers of growth was Courvoisier, led by Eastern Europe and South Africa. The new region has completed its strategy work and is now working on capital allocation in line with the group-wide strategy in a disciplined way to target the multiple opportunities we have in these markets. For APAC and GTR, we registered a flat trend in the first half. The biggest market, Australia grew plus 2.6% with double-digit growth in both Aperol and Espolon, which is now contributing about 1/3 of the total top line in Australia. And this was partially offset with the flattish trend on Wild Turkey, which still contributes more than 50% of Australia's top line. Here, we're continuing our focus in the on-premise and activating strongly. In GTR, we recorded a plus 6% growth. As you might remember, in Q1, it was negative 13.5%. It was off a high base admittedly, but it was also impacted by geopolitical events in certain geographies. In Q2, while an easier comparison base helped, we also focused strongly on the Aperitifs in Europe. And below, you can see our launch in easyJet and British Airways of the Aperol to Go Can, for example, while also activating across numerous airports. In the rest of the region, we recorded solid growth in China, India and other partnership markets, but this was more than offset by South Korea, where the completion of our distribution company integration has led to a negative impact this year. Right. Now let's change the optics from regions to houses, starting with Aperitifs. Overall top line growth was an encouraging plus 4% in the first half. Aperol delivered a solid performance of plus 3.3%, benefiting from the positive trend in the bottle, which was amplified by launch of innovations such as Aperol on Tap. All regions contributed to the positive trend, and we'll talk more about the Aperol innovations on the next slide. Italy saw a resilient performance, while in Germany, the brand was held back by the challenging consumer environment. Elsewhere, we saw a good contribution from the U.S., U.K., France, Brazil and Australia. For Campari, we reported plus 2.3% growth with solid performance in Europe and North America. And Campari also benefited from the launch of the Campari Spritz ready-to-serve in Q2 in some European markets. It's early days, but so far, the response from the trade and consumers has been very positive, particularly in Italy and Germany. The remainder of our Aperitifs portfolio grew 8.8%, primarily driven by Sarti Rosa, which continues its solid growth in its core German market and is also progressively benefiting from the rollout into other high-potential countries. It's important to note that only a few years ago in 2023, only 4% of Sarti Rosa top line was outside of Germany. This has now reached 48%, showing the solid reception that it's having in new markets. As I mentioned before, the U.S. launch is now underway and the initial trends are very positive. In the U.K., it has already become the #1 innovation launch in spirits in Sainsbury's in just a short few months. Now one of the key pillars on our CMD was winning the first shared drink with new formats for new occasions and providing convenient options for our consumers. And here, I want to walk you through what we've launched so far for Aperol. Of course, the bottle and the perfect serve remain a critical piece of our strategy, and the on-premise focus remains fundamental in order to reach new occasions and achieve incremental growth. We've accelerated the expansion of the ready-to-serve into new markets. Now we have 15 seeding markets, and the trends are all positive. And this allows consumers to achieve that perfect serve at home in a glass over ice. As you all know, we piloted Aperol on Tap last year over the summer in select locations. This year, we are rolling it out across the peak season in more and more high-velocity venues and events in select markets. The Tap program allows us to use events not solely for visibility, but also for sales. In just 3 months, the Tap volume in Italy has reached roughly 1.5% market share of premium beer. This is exactly the profit pool we want to penetrate further. Lastly, we also launched the long-awaited Aperol to Go Can in the U.K., Belgium, Austria and GTR. The idea is simple, making Aperol accessible in occasions, where we're not able to play in the past. Towards the end of the year, we're also planning to launch a glass to-go alternative for some select markets like Brazil, which similarly to Tap can be an on-premise alternative to offset local constraints like the lack of [indiscernible] in Brazil. Now all these innovations give us incremental top line and higher or on par gross profit per serve versus the 321. . Now moving on to the House of Whiskey and Rum, we recorded a decline of 6%, mainly due to the impact of the whiskey category challenges in the U.S. South Korean impact that I already mentioned and a temporary demand-led supply constraint on Russell's Reserve, as I've told you before. And going forward, supply will be strategically managed in the upcoming years to ensure that we have a more consistent aging liquid supply. Jamaican rums were resilient with flattish top line, including solid underlying trends in Jamaica, offset by a high comparison base in the U.S. In the House of agave, Espolon grew 8.2% in the first half with balanced growth in both Blanco and Repo, supported by the launch of Extra Anejo. Here, while we see the ongoing benefit from geographic expansion, the majority of the growth is being driven by the core U.S., where the brand continues to gain share. On the next page, you're going to see some additional details on Espolon. First, looking back at the performance of Espolon in the U.S. over the last 10 years on the top left chart, you can see what the trajectory it's had. There's been a lot of growth in tequila overall, but both in the initial period of growth between 2015 and 2022 as well as the most recent period, Espolon has outperformed strongly. The premium segment is currently the fastest-growing part of the category as many consumers trade down from the larger super premium segment. And Espolon's quality-led premium positioning benefits from both trading up and trading down. Espolon in 2015 was the fourth largest premium brand in the U.S. And now as of 2025, it is the #2 with a CAGR growth of plus 19% between 2022 and 2025. Now looking instead to the year-to-date sell-out data in '26 in the bottom left, we see this trend continuing. In the Nielsen off-prem, Espolon is 1 of only 4 growing top 10 brands. In fact, across the 4 largest tequila states, Espolon is outperforming by 9 points on average, including in key battlegrounds of California, Texas, Florida and New York. In NABCA, we have gained plus 70 bps market share and are the only top 10 growing brand with a plus 12% growth. Similarly in the on-premise, we are again the only double-digit scale brand in the category, and we plan to continue this trend with investments behind the brand, selective promotions, but keeping our pricing strategy, which we believe the great liquid supports the strong value equation for the consumer. And lastly, looking at the right part of the page, you can see we also have ample incremental room for growth. Smaller pack formats are the main growing part of the tequila category today in the U.S. with plus 3% growth in smaller than 375 mil versus negative 4% for the overall category year-to-date. We launched our smallest format to date, which is a 200 ml bottle only in June this year. It's already seen a strong pickup, and we expect more contribution going forward with potential additional innovations to come in this segment of the market. The variant innovation will also drive additional growth. The Extra Anejo launch in June at $70 per bottle, for example, cement the brand's accessible premium space with one of the most affordable and frankly, delicious Extra Anejo offerings on the market. Finally, we're going to have a look at our House of Cognac & Champagne and then the local brands. The House of Cognac & Champagne recorded a plus 4.6% top line growth with solid performance in Courvoisier driven by developing markets and APAC. In the U.S., we held a stable trend despite the ongoing category pressure. The growth in Grand Marnier, on the other hand, is mainly due to an easy comp base with normalization expected in the balance of the year. Within our local brands, SKYY remains an important part of our portfolio, and we're pleased to see the growth of plus 5.7% in the first half, primarily driven by Argentina due to the popularity of SKYY Cosmic, and that was more than offsetting the ongoing softness in the U.S., in line with other major players in the U.S. vodka category. I'll now hand the floor over to Francesco, who will walk you through the first half financials in more detail. Francesco?

Thank you, Simon, and good afternoon to you all. Let's start by looking at the EBIT margin trends. Overall in H1, we recorded 130 bps organic EBIT adjusted margin expansion, supported by the pull forward of gross margin benefit, while A&P and SG&A are progressing as planned. In gross margin, we recorded a solid organic accretion of 130 bps, supported by a combination of stronger mix effect due to the solid performance of aperitifs in early peak season, the phasing of our COGS productivity gains, which we were able to realize faster than originally expected and now in the base, the tail end of agave benefit that we have flagged previously and lastly, limited tariff impact of EUR 7 million. Here, the impact was lower than we originally expected for H1. Due to the fact that between February 20 until the end of the quarter, we paid only 10% tariff in the U.S. instead of the originally expected [ 15% ]. As a result, we have updated our full year guidance accordingly. Based on the U.S. administration most recent decision of just a few days ago, the 10% tariff was for the time being reconfirmed. We will obviously keep monitoring the development around tariffs. Our A&P to sales reached 17.4% in H1, leading to a dilutive impact of 50 bps organic, driven by brand-building investments for peak season and to support our innovation pipeline as planned. On SG&A, our containment efforts are continuing in line with our expectation, and we benefited from an accretive impact of 60 bps organic in H1. This means that we are on track to reach by the end of 2026, the 70 bps guidance that we have provided. Some of you might have seen that Elena Anfosso has recently joined us as CHRO and brings with her significant large-scale transformation and automation capabilities. To close, EBIT adjust was arrived at EUR 358 million, reflecting a margin of 23.7% with plus 8.5% organic growth, excluding the net negative impact of EUR 23 million from perimeter and FX. In terms of P&L, we recorded a positive evolution supported by business momentum. Group net profit adjusted grew at 4.7%, mainly driven by the positive evolution of EBIT adjust as well as favorable impact of financial expenses. EBIT operating adjustments were negative at EUR 109 million, mainly driven by the write-down of assets marked for disposal of EUR 82 million as we recognize the diminished strategic value for the route to market announcing past acquisition, and we had to adjust their asset value as we dispose of them. Simon will comment more on this new disposal later in the presentation. Negative EUR 17 million related to other fixed assets, negative EUR 10 million related to bad impairments and finally, positive EUR 19 million coming from the Averna and Zedda Piras disposal capital gain. Adjusted financial expenses were EUR 44 million, with decrease driven by lower average net debt at EUR 2 billion versus EUR 2.3 billion last year, with average cost of net debt stable at 4.3%. The positive EUR 5 million adjustment you see in the table is related to the gain we booked due to the bond liability management executed in the context of the EUR 600 million bond issuance. For the full year, we are maintaining our guidance of around EUR 100 million financial expenses, also due to the impact of the new bond issuance, which has further improving our maturity profile. The recurring tax rate was at 27.9%, minus 130 bps versus H1 2025 due to favorable country mix. Recurring cash tax rate is at 25.8%. Lastly, I will cover the key balance sheet indicators on the next page. Operating working capital as a percentage of sales is at 52%, similar to the same period of last year and seasonally higher mainly due to some buildup of finished goods inventory for peak season and select increase in maturing liquids. Compared to the end of the year, the increase in operating working capital is also due to the normalization in the net trade position, driven by concentration of CapEx and related accumulated payable at the end of last year. On CapEx, the maintenance CapEx remained temporarily contained at 3% of sales, slightly below the run rate of around 4%. Extraordinary CapEx on the other hand is at 2% of sales, including the tail of the production capacity enhancement program, especially in Kentucky, with finalization expected in 2026 for a total offer of EUR 100 million. On cash flow, the recurring free cash flow before operating working capital change conversion is at 64%, in line with our historical 5-year average of 68%. The overall recurring free cash flow on the other hand, remained more limited at 4% conversion or EUR 19 million due to the impact of the operating working capital seasonality. This is expected to normalize into the second half of the year. On leverage, we remain comfortable at 2.6x, marginally higher than year-end leverage ratio due to some impact of the seasonality that I mentioned before. In fact, the increase of EUR 110 million in net debt is primarily linked to this operating working capital increase as well as some impact from the dividend payments, mitigated by the proceeds of the Averna disposal. And with that, I will hand back to Simon to talk about certain activity in 2026 and our outlook. Thank you.

Great. Thanks, Francesco. Look, you've all seen this page before, which is a summary of what we plan for 2026. And the reason we put it up, it's exactly what we are doing. And I won't go one by one as we've already covered the majority of these points, but it's important to note that all of these points are on track and will remain so for the balance of the year. So now just coming back to our portfolio streamlining, we want to give you an update on what's been keeping Fabio Di Fede so busy over the last 12 months. And with this release, we are happy to announce that we have closed another 2 disposals that you see on this page, which might be limited in terms of size, but have a clear and solid rationale. The first is Rhum Agricole business, including Trois Rivieres, Maison La Mauny and the second is the disposal of Cabo Wabo Tequila and Bisquit & Dubouche cognac business. Now in the past, we needed these brands to open up new markets, but this is no longer the case. For example, the Rhum Agricole portfolio was acquired to support the route to market in France. At the same time, they're margin dilutive, cash intensive and with very limited upside to growth within our portfolio. So together with the previously announced deals you can see on this page, we have already made significant headway over the last 18 months in this regard with the disposal of more than 10 brands or businesses. By the end of 2026, we are planning on coming to the end of our portfolio streamlining, which significantly reduces the complexity in the business. It allows us to concentrate resources, investment and management focus behind our fewer, bigger bets, and this is absolutely consistent with our capital allocation discipline. Now moving on to our outlook for the rest of the year. As you can see, we have an update on our guidance. Starting with the top line, we are confirming the full year guidance of circa 3% organic growth. On the EBIT adjusted margin, we now foresee an incremental uplift. And this is due to the more favorable tariff environment, which means we can expect a EUR 10 million benefit flowing through to the bottom line compared to our previous guidance. Accordingly, the full year negative tariff impact we now expect is around EUR 20 million instead of EUR 30 million. Considering the positive phasing into the first half, second half EBIT adjusted margin, therefore, will be relatively flattish versus the same period of the previous year in organic terms. All other contributors to the margin remain unchanged. This means that the underlying gross margin trend where we recorded phasing in the first half is not altered in our full year expectation. Now as I'm sure you've heard from many companies, the claims on the potential 2025 tariff refund have started. And we've also made a claim and recorded a EUR 15 million as a contingent asset. However, given that the timing and extent of the refund remains uncertain at this stage, and we see additional potential geopolitical volatility impacting COGS in the second half, primarily from things like logistics, we believe that these 2 effects might reasonably offset each other with no incremental benefit for the full year. Now to be clear, if we do see a benefit of that, we will update the guidance when we give you an update on Q3. But at this stage, we don't want to count on anything given the volatility around tariffs, payments and the geopolitical environment we're operating in. On A&P and SG&A, we confirm our previous guidance as we invest confidently behind the long-term development of the business. So overall, we're encouraged by the progress we made in the first half, and we continue to remain fully focused on executing the strategy we presented at our Capital Markets Day with positive traction across our priority brands and geographies for 5 quarters now. For us, the key word going forward is execute, execute, execute. And we're now happy to open up the floor for any questions you have. Thank you.

[Operator Instructions] The first question is from Sanjeet Aujla, UBS.

Hey, Simon, Francesco. A couple of questions from me, please. Firstly, on the U.S. Simon, can you just clarify if there were any further inventory adjustments into Q2? And how are you seeing the pricing environment evolve across your categories in recent months? And then just double-clicking on that, I fully appreciate the positives in the portfolio, but there are a couple of drags in particular Grand Marnier and Wild Turkey. What are you doing to try and stabilize those brands in the portfolio, please? I've got a second question after that, but maybe we can kick off with the U.S.

Sanjeet, I've got 3 questions on that first one. So let me see how we go with those. So look, I think in terms of the inventory adjustment in Q2, business as usual, no extraordinary movements on inventory, full stop. The second one was on pricing in terms of -- some was reading the question. categories in recent months. Yes. Look, I think we continue to see people getting a bit more aggressive as the trends remain challenged. I think in certain categories we're seeing it more than others. I know there's a huge degree of speculation about what's happening in tequila. At this stage, we're not seeing the read across in terms of really impacting our performance on Espolon. As I've said to you before, we believe we've got the right price strategy with Espolon. We're well positioned in the consumers' eyes and the trade's eyes as a good quality tequila with a good value proposition. And so I think, look, we're going to have to wait and see. There's a lot of speculation as to what may happen in the next couple of weeks in terms of new strategies. We're confident in what we're doing. We're price promoting in the way that we would normally do it around the key seasons. But let's wait and see. As we've said before, pricing is always relative, but we don't see a big read across between potential movements of brands above us impacting the business. Last one, I think was Grand Marnier and Wild Turkey. I think [indiscernible] Grand Marnier is -- and you -- I'm sure you see this in some of the data and heard from other people, we're seeing the traffic numbers in the U.S. starting to come back. But what we're seeing is the tickets aren't following at quite the same velocity yet. So I think where we see the opportunities with things like the Grand Margarita as people are going out again. If they are going out, they want to trade up. I think we can continue to leverage that trend on Grand Marnier and take advantage of people getting back into the on-trade. I think on Wild Turkey, look, it's a tough category. You've seen it in a number of the reports from other companies. I think we've been rebasing our strategy. We've been looking at what other opportunities we have to work with it. We've got new innovations that we're looking at in ready-to-drink in Australia to keep things moving forward. But look, it's a tough category at the moment, and we've got to carve out our rightful share of it.

That's really helpful color. My second one was really on Germany and just understanding the weakness there. To what extent is that a continuation of the retailer headwinds you had in Q1? Or is it just a weak category and you expect those trends to persist into H2?

Yes. Look, great question. Look, it's -- I think it is just a weak category. We've got no issue with the German retailers. We've managed to continue to work with the retailers across Europe. I think we're pleased with where everyone ended up this year. But I think, look, if you look at the consumer data, you look at what's happening in terms of other consumer goods outside of our sector, the German consumer remains under significant pressure. And you see that very selective purchase power. And as a result, look, we've got to position ourselves the right way for when they do come back, and I think we're doing exactly that.

The next question is from Andrea Pistacchi, Bank of America.

Two questions, please, on 2 aspects of your guidance. So starting with the top line, just on the 3% in H1. So your guidance for the year, which is to confirm about 3% implies, I'd say, something similar or a fraction more in H2. Now bearing in mind the more difficult comparison base in H2, where do you see the incremental positives that will take you to close to 3%? And are you able to share any color maybe on how Q3 may have started? And for Francesco on margins, up 130 basis points in H1. I think, Simon, there are a lot of moving parts in the margin, but I think you said flattish for H2. That's the way to think about it. Now the tariff benefit should be a positive in H1 and in H2. Positive mix, I assume, should continue as you outperform with aperitifs. So where is the main offset that will hold back margins in H2 versus H1? Is it -- I mean, it's probably a bit less [indiscernible] benefit, but maybe you can talk about the COGS pressures, the input cost situation along with this.

Andrea -- okay. I mean, I think in terms of the top line question first, we're guiding on the full year at 3%. As you can see, we're pretty close to that for Q1, pretty close to Q2. We've got a bit of work to do. But I think what we've got is we've got some good momentum coming through in terms of the brands. We're seeing very strong execution, particularly from Q2 and to answer your question and into Q3. I'm pleased with what I'm seeing in terms of the activations we've got across not only North America, but also across Europe, which is giving us, I think, some strong momentum coming into Q3. So I think from that point of view, that's really where we're seeing the difference between where we've got the first half and then landing the full year. But look, it's a competitive market. We've got some work to do, but that's what we -- that's our target, and that's what we're going for. So Francesco, you want to take the --

Absolutely. In terms of margin, I mean, we pointed out the key driver of the margin trend during the second part of the year. We still expect a positive COGS evolution, but to a lesser extent compared to H1. And to be fair, we actually feel that for the entire part of the period, the weight of the tariff on the other side. So we expect some accretion on the COGS side, but limited. And clearly, the rest remains the same. We expect some pressure on price, offset by mix. Mix remained positive, as we see in H1.

And Andrea, I might just add one thing to that comment as well. As I said in my closing comments, I think the key thing here is around the tariffs, we've seen -- I think it's fair to say, a fairly massive degree of volatility on how that has played out. And as a result, any updates we have on that on refunds or anything else we can pick up in Q3. But at this stage, we don't have that level of confidence yet. And I think we can continue to see what that looks like and update you accordingly.

Maybe something I can add in terms of input costs, we're actually still maintaining a good position on general input cost with the exception of logistics. Logistics clearly have increased already in the first half and keep increasing in Q3, and we expect the same to continue in Q4.

The next question is from Celine Pannuti, JPMorgan.

My first question is on Italy. You mentioned that -- can you talk a bit about the market? I understand from your chart on Slide 4, I think market was up 1% on sell-out. It seems to have decelerated in Q2. But what -- if you can talk about like those new tab, you said is 1.5% of the beer market. What is it in terms of total Aperol? And if you can talk about price point in that market and how you think there is further upside to grow in Italy? And then my second question is in the U.S. Can you talk about the market environment? It seems on-premise has slowed. Are you seeing any change throughout the quarter in terms of maybe an improvement at the end of the quarter or early July, if there's anything you can do? And overall, what is your assumption on the U.S. as you look at your guidance for the second half?

Sure. I think in terms of Italy, the important thing is when you look in comparison between the quarters is you got to remember, the first quarter in Italy is significantly smaller than the second quarter. So there may be some movement there, which is driving your read of 1 point down. I think the key thing on this is if I reflect on the same conversation we had last year, where the market was very negative and the fact that we're now delivering as a group plus 5% and with a focus brand plus 4%, I think it really reflects the momentum that we've got. I think it's coming from a number of things, as I said, first one is, I think we're seeing extremely strong execution this year with over 4,700 activations across Italy. I mean that's a massive amount and a real step forward for the brand. We increased the investment. And we've also -- as I said, we've increased the formats. So something we're starting to broaden what is already a very established ritual in Italy into new occasions we couldn't get in before. I just use an example of one of the festivals we went to, which was the Bad Bunny concert at San Siro recently. Previously, we would have sold 0 Aperol Spritz. By having it on tap, we sold 22,000 Aperol Spritz in one night to a very dynamic legal purchase age crowd. So I think what we're seeing there is a broadening of the occasionality through the formats. And I think just momentum in terms of getting the brand back on track in its own market. Celine for that first point, maybe that answers that. I think the second one is, do you see -- any changes seen in kind of quarter-to-date [indiscernible] guidance for the second half? Yes. I think, look, as we said in our overall guidance, look, it still remains quite a tricky market and you look at all the same data we do. I think the key thing where we have points of difference is on the brands we're focusing on and where we're building them, both in NABCA and also in the on-premise, we are significantly outperforming the market. And so I think it's a balance between a very positive story on those priority brands, balanced also with the broader portfolio that don't have the same level of focus behind them. And as a result, that's why on the full year guidance, I think we're being quite sensible in terms of balancing those 2 sides of the portfolio out.

Can I just have a follow-up on the previous question and your gross margin saying that the beat in H1 doesn't change the outcome for the year. So if I understand correctly, it's a question of the phasing of the productivity savings and maybe as well a phasing of the cost benefit and maybe again, cost impact in the second half. I just want to understand on the mix because you mentioned that as a positive impact and the fact that you mentioned a good start to the year, is potentially a good summer incremental to your flat margin or, let's say, gross margin guidance for the year?

Yes. Celine, for sure, it's a phasing on the cost side. So we can confirm that. In terms of mix, clearly, mix is still positive also in the second part of the year is driven by the aperitif growing faster. But then the rest is clearly offsetting more when it comes to price, we feel more pressure in terms of price. So the net-net, the impact in terms of margin is lower compared to H1.

The next question is from Simon Hales, Citi.

So 2 for me as well. I wonder Simon, if you could just come back to your comments around how Q3 has started. I hate where you asked about the weather and maybe building on Celine's sort of comments there. Clearly, we've had good weather in Europe through the back end of June and into July. Is that supportive to your business in all of your markets? Or has it been problematic in some regions? I think it's been too hot for people to go out of those is my underlying question because I think there was some fear that what we might see on the tariffs in Italy. Is that something that you've seen? And then secondly, with regards to the recently announced brand disposals, are you able to help us in terms of how we should think about the impact of those disposals on earnings in 2027? You've given us the rough proceeds number of around EUR 30 million. How do we think about what the contribution of those brands from a sales and EBIT standpoint is at the moment?

Simon, look, I think in terms of Q3, I mean, the way we run the business is, look, we hope for good weather, but we don't count on it is the way we look at it. And that's why we've increased the number of activations and putting out. So I think actually, I haven't got the days in front of me, but from memory, I think actually the number of sunny days across European capital has been reasonably similar year-on-year. So I don't think it's been a big driver of it. I think what's been a more positive driver was our execution and what we're doing in terms of getting out to the trade and getting into new occasions. So I think from that point of view, I think, look, it's better if the sun is shining, of course, but we're not relying on it. I think on the second part, on the disposals, the overall impact we talked about coming through. I don't know, Francesco, do you want to take this one or do you want me to?

Yes. No, no. Let me take it. If you look at 2026, we have indicated a perimeter impact of EUR 70 million in sales and EUR 30 million in terms of EBIT. You need to consider that Cinzano is impacting for 11 months and Averna is impacting for 7 months. So all in all, when you look at the entire asset that we disposed, the, let's say, pro forma revenue were about EUR 130 million, including Cinzano, Averna, all the rest. I mean the last bit, the last transaction are for about EUR 40 million in total. So the other were EUR 90 million and so the additional is coming for a much, much smaller number. When it comes to Cinzano, Averna, they had a positive EBIT contribution. But when it comes to the last disposal, they had a very, very negligible contribution in terms of EBIT. So they are EBIT accretive in terms of -- and I would say they are also gross margin accretive and EBIT accretive. So you need to look at this disposal in a very different way. These are assets that were more difficult were not generating growth and they were not generating gross margin.

The next question is from Trevor Stirling, Bernstein.

Two questions from my side. Simon, concerning A&P, A&P clearly up in the first half. I think from memory, you said that, that increase in A&P would probably be first half weighted behind the activation. So given the momentum in the business, I wouldn't be surprised if you're going to throw a bit more A&P into the second half as well. But any more -- any guidance on that would be welcome. And the second thing -- question for Francesco around the extraordinary CapEx. I think, buried in the back of the presentation, there's a chart that says that was EUR 34 million in the first half, so implicitly stepping up to EUR 66 million in the second half. And I wonder if you could just explain why the CapEx is second half weighted on the extraordinary CapEx.

Trevor, yes, look, on the A&P, as we guided, look, we always have a bit of a weighting into the second quarter as we get ready for the peak season. But of course, there's a balance between that as we go. Look, we don't just have one peak season. It runs Q2, Q3. So actually, there's a balance between first half and second half. Clearly, if we see the opportunity to invest more behind the brands, as I said before in the CMD, I really think now is the time you invest. When everyone is pulling back and kind of making short-term decisions, we're investing for the long term. So if the top line is there, we'll be reinvesting behind that. And one of the good examples of that would probably be Sarti, where we see some outperformance, and we are maintaining a healthy reinvestment rate to build a brand for the long term. So Francesco, do you want to take the second one? Yes.

Yes. You actually pointed out, we actually confirm around 8% of CapEx over net sales for the entire year. There are a number of items that have been moved to the second part. There is, for sure, the headquarter where we are progressing, but the vast majority of the work are taking place now because the first part was more foundation, and we are completing the Kentucky. That is the part that is attracting most of the CapEx in the second part. All in all, we are going to have, let's say, maintenance CapEx, let's say, of around 4%, a bit more and extraordinary CapEx a bit less than 4%. All in all, slightly below 8%, and we can confirm that.

And Trevor, as you know, just practically on this, you don't normally pay up all of it until you know it's working. So we're heading out to Kentucky in about 4 weeks' time to make sure it's there.