Rémy Cointreau SA (RCO) Earnings Call Transcript & Summary

Good day, and welcome to the Rémy Cointreau Full Year Sales 2019-2020. Today's conference is being recorded. At this time, I would like to turn the conference over to Luca Marotta. Please go ahead, sir.

Good morning, everyone. Thank you for your participation to the Rémy Cointreau conference call for its full year sales '19/'20, covering the period from April 2019 to March 2020. First and foremost, we hope you and your families are all safe and healthy. This morning, we have 3 main messages to highlight. First message. This year has been a challenging year for the group. Sales are down 11.2% in organic terms for the full year. And as you all know by now, the main driver of this decline was the 68.7% decline of the Partner Brands division, which included a EUR 56 million sales loss from the voluntary termination of distribution contracts in Czech Republic, Slovakia and the U.S. Now if we look into our Group Brands performance, organic sales were down 6.3% in the full year. This was the consequence of a number of situational factors already faced in the first 9 months of the year, including, as you remember, the route to market changes in Europe; the challenging Travel Retail trends, in particular, those related to the fall in Chinese tourists going to Hong Kong, so even before the COVID-19 issues; and the reduced level of inventories carried out by our U.S. retailers. And on top of all that, we faced the impact of the COVID-19 pandemic since late January, which estimates to have impacted the business to the tune of EUR 36 million, 3-6, in the fourth quarter. So adjusted for COVID-19 effect, Group Brands would have declined by 2.8% in the full year '19/'20 and not by 6.3%. Looking at Q4 specifically, Group Brands sales declined 22.3% in organic terms. Adjusted for COVID-19 and the early timing of the Chinese New Year, which was a reversal of EUR 5 million headwind, Group Brands sales were down on the fourth quarter by 6.5%. The second message of this morning is that we note, we highlight, that the full year depletions have been trending broadly in line with our underlying sales. In Mainland China, depletions continued to grow solid double digits in both volume and value terms despite the weakness experienced since the end of January because of the COVID-19 situation. In the U.S., cognac depletion declined over the 12-month period, penalized by retailer reduction inventory levels. And in contrast, value depletion for Cointreau were up high single digit despite some weakness in March as some on-trade outlets canceled some orders because of the COVID-19. In Western Europe, the changes in route to market have been putting pressure on our performance. We have also experienced slower trends in the U.K., but ongoing strength in the Nordics. In Russia, '19/'20 was a challenging year due to a number of commercial issues that are now being resolved. In Africa, we continue to benefit from good depletion trends in South Africa and Nigeria and the Middle East. And last but not least, in Global Travel Retail trends we can say that these trends have been weak since last August, mostly due to the sharp decline of Chinese travelers going to Hong Kong with protests. And this weakness clearly deteriorated further in the fourth quarter with COVID-19 taking its toll on air traffic. The third message of this morning is the outlook. Looking at full year '19/'20, we now anticipate our current operating profit to decline by around 20% in reported terms and by around 25% in organic terms. Looking at full year 2021, fiscal year, not full year 2021, we anticipate that the Q1 sales will be negative to decline by 50% to 55% in organic terms, essentially due to the COVID-19 situation that is supposed to last for the next couple of months, at least. Now let's move to the full year sales analysis, Slide #3. Sales amounted to EUR 1.248 billion, down EUR 101.1 million year-on-year or a minus -- 9% decline on a reported basis. This reflects an organic loss of EUR 125.6 million or 11.2% organic sales decline and a positive translation currency impact of EUR 24.5 million or 2.2% gain. This currency gain -- translation currency gain is in line with the guidance provided in November of a EUR 20 million to EUR 25 million benefit of sales coming from the forex. Let's now move to slide number 4. As we just said, currency translation increased sales by EUR 24.5 million in the 12-months period. This was largely driven by the strengthening of the U.S. dollar versus the euro with a gain in terms of translation of EUR 19.1 million here, given most currencies were also well-oriented. Only marginal exception, the Australian dollar had a minor negative impact on group sales to the tune of EUR 0.2 million, so very much. Now in very interesting slide, Slide #5, which shows our quarterly performance over the past 8 quarters, 2 years, and the 12 months' organic performance of our Group Brands, which is shown in red. While '19/'20 was a challenging year with the Group Brands down 6.3%, as I already said, it came after a very strong year during which Group Brands grew by 9.8%, so almost double digit. So over the 2-year period, we note that our Group Brands are still up 3% on average on an organic basis, which is a clear achievement, in our opinion, considering the challenges faced over the past 12 months. Now let's move to the full year organic sales trends by region, Slide #6. All 3 regions declined over the year for both the group and the Group Brands. Americas posted a 5.8% organic decline. Adjusting for the termination of distribution of [ Indo ] Piper Sonoma in the U.S. and the COVID-19 impact in March, sales would have been down 3.7% in the full year. Asia Pacific was down 9%, but adjusting for it in the Q4 and the reversal of the headwind of the Chinese New Year of EUR 5 million, sales declined a much more modest 1.6% in the full year due to the weakness in Southeast Asia and Travel Retail, Asia mainly. Mainland China was strong. Looking at EMEA, sales were down 21.6%, with a very significant, important impact of the termination of the distribution contract in Czech Republic and Slovakia. And adjusting for the termination of the Partner Brands distribution agreement and the COVID-19 impact in the Q4, sales would have declined in EMEA by 3.5%, mainly due to the changes going on in the market. Let's now turn to Slide #7 to dig into organic trends by region for the Group Brands, so only Group Brands. Let's start with Asia Pacific, which fell 8.9% in the full year due to a significant double-digit decline in the last quarter, consequence, essentially, of the COVID-19 pandemic. Greater China slightly declined during the year, as strong trends in China Mainland were offset by weakness in Taiwan; Hong Kong, clearly; and Macau. Despite the impact of pandemic from the end of year, January, China Mainland delivered double-digit growth in the fiscal year, led by solid double-digit volume value depletion trends. Sales shipment admittedly declined double-digit in the last quarter as a result of the COVID lockdown, and the early timing of the Chinese New Year was a EUR 5 million reversal hit. In the Q4, the -- clearly, winner and resilient channel distribution was e-commerce, as expected, as highlighted in late January, delivering more or less 25% growth in the quarter and e-commerce in China Mainland now accounting for more than 20%, 21% due to the size of China sales. The other subregions out of Greater China, Southeast Asia and Travel Retail Asia were also very strongly impacted by the coronavirus in Q4 and posted double-digit declines both in the last quarter and the full year. End of March 2020, Asia Pacific as a region accounted for 31% of group sales, flat versus last year. Now let's move to the biggest region, the Americas, where Group Brands sales decreased by 4.3% in the full year. Let's start with the U.S., which declined low single digits in the full year, with weaker cognac sales partially offset by a solid robust performance of the Liqueurs & Spirits division. Group Brands' value depletions also declined low single digit, as you can see, minus 1.9% precisely in value, as retailers reduced their level of inventories along the year. In Q4, the weakness of the depletions mainly reflect the postponed price increase. Indeed, unlike what we said in January, with COVID-19, we decided to delay our price increase because of ethic reasons. As a result, while in the Q4 last year, depletions benefited from the user tread load, partial tread load ahead of the April 1 price hike, this did not repeat this year. Q4 depletions were also impacted by some cancellation of order coming from on-trade outlets because of the lockdown. Canada was down low single digits in the full year, with depletion growing slightly faster at plus 1%, led by St-Rémy. LatAm ended the year on a strong note, with full year sales up double digit, led by Central America and Mexico, but on a low base. And the real drag within the region was the Travel Retail America business due to commercial tension with 2 major distributors and impact of the coronavirus in the last quarter. End of March, Americas, the biggest region, accounted for 44% of our group sales, up 4 points year-on-year. Now -- let's now turn to the Slide #8 and to the big Europe, Middle East and Africa region, which posted a 6.4% decline for the group brands in the full year, implying a further deterioration in the Q4 due to the coronavirus. As you know, EMEA was already facing some headwinds early in the year as we upgraded a number of our route to market in the region, and that led to some disruption, as expected and highlighted. Now looking at the trend by subregion for the Group Brands inside EMEA. Let's start with the Western Europe, which was weak, weak across the board with an exception in the Nordics. Benelux, Switzerland and Spain were the main reason of the weakness, while the U.K. also slowed slightly, impacted by the Brexit and in the last part of the fourth quarter by the coronavirus. Central and South Europe was -- were penalized by the changes in route to market in fiscal year '19/'20, including Germany and Czech Republic and Slovakia. Russia and Northeast Europe declined substantially because of Russia, which has been difficult for us this year. And Africa was the only subregional here to deliver some growth in the full year. This was driven by South Africa and, to a lower extent, by Nigeria and other countries, but on a very low base. Travel Retail posted inside EMEA region a slight decline in the fiscal year. While our cognac sales proved resilient until February, March clearly suffered from the pandemic. And Liqueurs & Spirits for Travel Retail inside EMEA were fairly weak during the year as we reduced the level of promotions in some key countries. End of March, the EMEA region accounted for 24% of group sales, down 4 points year-on-year. Now let's move to our full year sales trends by division, so a different analysis, slide #9. As already mentioned, our 11.2% decline was largely driven by the Partner Brands division, whose sales dropped by more than 2/3, 68.7%, as we voluntarily terminated some significant distribution contracts. Group Brands were down 6.3% in the full year, and as already said, down EUR 2.8 million, adjusted for the COVID-19 impact. This was driven by a 7.5% decline in cognac sales, which means 3.8% decline excluding the impact of the COVID-19 and 3% decrease for Liqueurs & Spirits, which means more or less flat, excluding the impact of the COVID-19 by division. Let's now turn to Slide #10 and the analysis by division, starting with cognac. As we just mentioned, the House of Rémy Martin posted an organic decline of 7.5% in the full year, implying a sharp drop of 25.2% in the Q4 due to the coronavirus, essentially. Inside Asia Pacific, Mainland China posted double-digit growth in the full year, led by similar double-digit growth trends in depletions, so not only globally as a region, but also inside cognac business. Sellouts, not depletion, sellouts trends during Chinese New Year 2020 were also up double digits despite the shortened period of celebration. In contrast, on a negative note, Southeast Asia and Travel Retail both posted in South East Asia Pacific significant decline in the full year. Overall, for the region and cognac inside this region, Q4 sales were down strong double digits due to the early timing of the Chinese New Year and the coronavirus impact. Inside the Americas, U.S. cognac sales and depletions both declined mid-single digit in the full year. Value depletions, on a positive note, included 3-point price/mix benefit, thanks to favorable pricing and positive portfolio mix. As already explained, this weakness was largely due to a reduction in the level of the inventories carried by U.S. retailers around the year. And besides, in Q4, cognac sales and depletion were penalized by postponed price increase, usually taken in April, and preceded by some partial preloading as well as some cancellation of on-trade orders to the COVID-19 lockdown. At the same time, we are experiencing very strong, strong trends in the U.S. of trade since March. Inside this very strong rebound of the on-trade in the U.S., we had admittedly some panic-buying pantry loading, as we can say. IRI shows that in the last 4 weeks ended April 5 Rémy Martin sellout was up 34%, led by VSOP and 1738, with an acceleration week after week over the period. In the EMEA region, our cognac sales were only slightly down as weakness in Western Europe and Russia was largely offset by good performance in Africa and the Nordics, a good resilience for the cognac business in the U.K. and EMEA Travel Retail. Concerning the volume value equation of the cognac business, the 7.5% sales decline was driven by a 10.1% volume drop, partially offset by 2.6% price/mix gain. End of March, the House of Rémy Martin accounted for 72% of our sales, up 3 points compared to the previous year. Now let's move to Slide #11, giving you, as always, some example or concrete realization. In this case it's digital e-commerce initiative Rémy Martin ran in China in February and March, in order to help our own trade partners and entertain our confined clients and keep activating our brands during the COVID-19 period. In order to do that, Rémy Martin held 6 sessions of live broadcast under 4 themes within 2 weeks: online DJ parties; cocktail classes animated by bartender; cooking classes along with Rémy Martin cognac pairing; and cognac master classes by our brand ambassadors. In the case of the DJ parties, for instance, Rémy Martin partnered with Douyin, the Chinese TikTok, and TAXX, one of the most famous club of Shanghai, to offer an online clubbing party. During the night, connected clients would win some Rémy Martin bottles, but also could buy them via using the Tmall platform. Let's now turn to the big Liqueurs & Spirits division, Slide #12. Liqueurs & Spirits division posted 3% organic sales decline in the full year, implying a 13.9%, almost 14%, drop in the last quarter. This slowdown was mainly driven by EMEA and Asia Pacific regions, while the Americas showed strong growth over the full year. Looking at the volume value creation of Liqueurs & Spirits for the 12-month period, the 3% organic sales decline was largely driven by volume decline, while price/mix was only marginally positive. End of March, Liqueurs & Spirits accounted for 25% of sales, up 2 points versus last year. Let's now talk to the performance of the major brands of the division. Cointreau posted a flattish performance in the full year as its robust performance in the Americas was offset by weakness in EMEA and Asia Pacific. U.S. was the main growth driver of the brand, driven by mid- high single-digit volume and value depletion trends. Lower depletion in the last 3-month period were the consequence of the postponed price increase as well as some cancellation of order in the on-trade because of the C-19. In contrast, off-trade sellout data continued to show growth -- strong trends with 100% to the double in the 4-week period ending April 5, according to IRI. Sales of our Greek brand in Metaxa have been largely penalized by the change of route to market in EMEA region since the beginning of the fiscal year, in particular, in key markets for this brand, like Germany and Czech Republic and Slovakia, as well as a very poor performance in Travel Retail where we are gradually pulling off the level of the promotion. In contrast, the brand recorded strong growth rates in newer markets of Asia and Americas. Moving to Slide 13 and the other brands of the division of Liqueurs & Spirits, starting with Mount Gay, which was in a transition year ahead of the relaunch of the brand, which now -- we now expect to take place in September 2020. So we voluntarily slowed down our shipment in the fiscal year '19/'20 to prepare this upgrade. St-Rémy performance was contracted as EMEA and Asia were weak, but the brand's key market, Canada and the U.S., posted strong performance, led by successful marketing initiatives. The Botanist, the gin -- our wonderful gin, saw continued strength in the 12-month period, led by the U.S. and the successful expansion of the brand in Asia Pacific. And last but not least, the global Single Malt Whiskies business continued to benefit from a positive worldwide momentum in the category, in particular in the U.S., while the Asia Pacific was lower in the Q4 due to coronavirus impact. Moving to Slide #14, another example of digital activation by Cointreau of the U.S. With 70% of our clients looking for entertainment during the confinement, Cointreau created a number of rendezvous, including the Margarita Mondays and the Cointreau cocktail hour. We have an example of the Cointreau cocktail hour here several times a week. Cointreau invited bartenders to create a cocktail during live session on Instagram. At the end, clients can tip the bartender by donating to the United States Bartenders' Guild foundation, and the tip is matched by Cointreau up to a global maximum level of $3,000. Which has been -- what was the impact? Since the lockdown, Google search for cocktails has doubled, and for Cointreau specifically, this indicator has been multiplied by 5. Finally, let's now turn to major Partner Brands division, Slide 15. The division posted 68.7% organic sales decline in the full year, to be precise. Yet, adjusting for the EUR 56 million in sales voluntary termination of distribution agreement in Czech Republic, Slovakia and United States, organic sales decline will be more limited, extent of minus 4.4% in the full year. What is mostly left in this division is distribution of Partner Brands, mainly in Belgium, which are affected by the very challenging market condition. End of March, Partner Brands accounted for 3% as highlighted and estimated, of group sales, down 5 points year-on-year. As a reminder, in the full year '19/'20, the termination of Partner Brands' distribution contract will have an impact already factored inside our outlook and your consensus of EUR 5 million on current operating profit. Now let's now turn to the last slide of my presentation before Q&A if you have some, I don't know, and maybe not. Let's now turn to Slide 16 and the outlook. With full year sales '19/'20 slightly above the guidance provided on April 2, we now anticipate our current operating profit for the full year '19/'20 to decline by around 20% in reported terms and around 25% in organic trends, so clearly, the lower extent of the forecast we gave there for the second. So 20% reported, I repeat, and 25% in organic. Now let's try to project our sales to the fiscal year 2021. While it's still early to talk about the whole year, while we can anticipate that our Q1 sales, I'm talking top line, shipment, sales, so from April to June 2020, are supposed to decline sharply by 50% to 5% -- 55% in organic terms. I repeat from 50% to 55% decline in organic terms. This reflects the combined impact of destocking efforts by our Chinese wholesaler because of the COVID lockdown situation and the slow recovery of the on-trade. We have some exceptions in some region, we talk about that. But overall, the situation is still a little bit slow in the on-trade, at least. And very slow business trend in our key European and American markets due to the current C-19 lockdown. At this point -- moment in time, this point in time, we expect to see some gradual sales recovery in the second quarter, so July to September, led by some replenishment by Chinese wholesaler and Chinese market ahead of Mid-Autumn Festival as well as some sign of improvement in the Americas and in EMEA. So in anticipation of that, we decided to reopen our cognac production site on April 14 and the Angers site for Cointreau and our Liqueurs & Spirits business on April 20, 2020, of course, with all the security measures that are required for the safety of our employees, which is the most important thing. I'll be now very happy to take your questions you might have. Thank you.

[Operator Instructions] We will now take our first question from Trevor Stirling from Bernstein.

Luca, it's Trevor here. Three questions, please, Luca. So the first one is when you talk about Q2 a gradual -- very gradual sales recovery, are you thinking more in terms of that there will still be a decline but at a lower rate? Or do you think we actually could see some growth in Q2? And second question, could you just remind us of what your channel split is in China between restaurants, KTV, spas and clubs, off-track, et cetera? And the third question then about the U.S. Clearly, you had a big hit in Q4 because of the tough comp on the price increase from last year. But if you had to estimate what the underlying rate of sale for Rémy Martin pre-COVID was, could you give us any sense of where you think the underlying business was as we went into the COVID crisis?

Clear. So I will start with U.S., which is the most complicated. Your question was very sharp, so we can answer very directly. Despite the fact that at this stage, there is some buzz and confusing element between the reconciliation that everybody is trying to do between depletion, shipment, sellout, panic pantry loading, panic buying, what -- the clear important question is what you just said. What is the underlying before COVID before any jeopardizing act between channel? Our guess estimation overall, cognac in the U.S. is around flat. So clearly, the competitive arena is stronger than before in the U.S., So no panic on that. We take our measure. We increased our advertising promotion programs around the key pillars. VSOP is not neglected. Still -- we are still -- it's still very, very important for ourselves. We are upgrading our strategy. But to your question, the answer is flat. What is gradual, which is, I think, a question that everybody has. We said gradual because we have no crystal ball at this stage. So I'm not negative. So clearly, the Q1 is minus 50% to 55%, so it's very sharp. It's important. Q2 will be better. At this stage, I'm not able to say that will be a growth compared to last year, also because the Q2 of the last year was not so small for some region. So I think that would be still negative but a much more lower extent compared to the Q1. So the year 2021, without giving any guidance at this stage, will be clearly a year of progressive acceleration with strong volatility between months inside the quarter, starting with a very low Q1, improving Q2, and our assumption is that profiting of the rebound and the sellout and final consumption that we hope will be shown during the summer. And on top on potential good Mid-Autumn Festival, we'll be able to increase even more sales and operating profit in the second part of the year. Clearly, top line is important. We are taking some strong measures in terms of cost, but with such a huge hit on the Q1 and the recovery in Q2, even if we are not committed to have an increase on the Q2, it means that the operating profit for the H1 will be under pressure. No panic on that. We'll be more precise for June, but it will be a year of 2 halves, top line being the most important things; cost reduction, the second one; and as a result, operating profit. So I think that I gave more elements than your initial question was, but it's important also for everybody. Split of channel. Before Chinese New Year, before COVID, we were, as you know, between on-trade/off-trade between 45-55, 43-57, 40-60 in China Mainland according to the quarters. We are moving more off-trade because on-trade is locked down. So we are switching to a 70-30. It will last forever? We don't think so. It is something that bother us? A bit on the short-term and not in the long-term because off-trade means direct sales in a way as well, means better control of the stock level. So it's penalizing in the short term, the on-trade shy reopening rate. Determining a shift in the off-trade is not something that strategically will imply something that will prove quite the opposite. I read this morning on that point your research. A point on that. Your side now in terms of dynamics are very important. But remember that some indicators like metro and restaurants are not 100% applicable to our cognac business, which is more upgraded compared to that. We are not matching the restaurant, even if it's true that more dynamics of the role in China is good for the future. Compared to your note, at this stage, our main strength are less on Guangzhou -- Guangdong region, sorry, are more in Shanghai region, more, at this stage, in Shenzhen and other cities. So when as a delayed effect this dynamic in Foshan, in Guangdong will be applicable also to our classical channel in which we are stronger, will be much more benefit for our business. So I gave you a lot of elements.

And our next question comes from Edward Mundy from Jefferies.

A couple of questions from me. I was hoping to get a bit more granularity around your assumptions for Q1 to be down 50% to 55%. I appreciate there's some destocking going on in China, but I would have thought that very strong off-trade performance you're seeing in other markets, such as the U.S., maybe might provide you compensation? The second question is, and I appreciate this is just the Q4 sales call, but given that you have provided full year revenues and profits, 11% revenues and 25% profit, is it a reasonable proxy for the shape of 2021, i.e., if consensus is looking for organic sales down 2%, should we be looking for organic EBIT down 5%? Or in light of some of the cost cutting that you've announced, should we be able to keep profit flat within that context? And then just finally, a little bit more color on the ground in China. What are you seeing by region, by demographic, by channel, by price point? I'd love to get a bit more of a feel as to what is going on in your business there.

Thank you so much for your -- so Q1, 50% to 55%. So it is really a very complicated exercise at this stage. Figures are moving every day, for every competitor, it's not only for us, because nobody has a clear vision of what's happening. We are witnessing, translating, preparing for the future, hoping for a rebound and some good surprise, best surprise. So it is a weekly -- I can say, deal is a size that weekly changes. At this stage, our vision -- this is trying for more granularity. By region, I can say that it is quite negative, the same way for Americas, global Asia, with China better than the rest of Asia, and Europe between minus 30% and minus 40%. So we can say that one is about 35%, the other is about 22%. It is accounting, it's not important. It is the same negative piece at this stage. Some sign of recovering more in some strong off-trade markets, the sign in -- some positive signs in U.K., some positive signs in the U.S. Too early to say which is the part of reorder, replenishment after the pantry loading or panic buying and if it is lasting. So we have to observe that. We could have a positive surprise. So in this country, maybe we are a bit on the safe side; in other countries, with some more risk. The real negative element that makes the difference between minus 30% to 40% to minus 50% to 55% is Travel Retail. Travel Retail, as far as we speak, is an empty channel. Nobody is traveling, operators are under pressure. And there are a lot of demands in terms of additional credit terms, a lot of these elements that, in our opinion, can be important in the short term but it gives nothing in the medium to long term because accidentally to invoice to increase stock. So we are very, very attentive, very cautiously doing that. So Travel Retail is really in a bad shape. This will be the first one to recover once things will be back to normal. But to do that, the flight situation should be better. So the real negative element, I repeat, is Travel Retail. Coronavirus impact overall is not a question you asked for, but it's important for you to try to have a model of the consensus. So let me start answering directly to your question on the consensus. It's too early. It's really too early. So focus on top line, but we do not give any guidance. This is an exception this year because of COVID. We have to anticipate it, also regulate our demand to anticipate with the consequence. We do not give, highlight any guidance on top line for the full year. We will adjust the cost structure, for sure. And the H1 operating profit will be under pressure, and we put a lot of attention and measure to improve the second part of the year to be in a positive land compared to the second half of '19/'20. But you have to understand, the coronavirus, EUR 36 million in the last quarter, means that for our business, it's important, maybe it's even more important than for other competitors. So EUR 36 million on the last quarter means the coronavirus-specific impact is around 15 points. So overall, on a global year, you might estimate with the impact of coronavirus in terms of top line between 10 and 12 points if everything continues that way. We will take a lot of measures to reduce the impact on bottom line on a marginal way to reduce the cost base, but COVID is important. So at this stage, I cannot give you a clear answer on the consensus. It's too early. Before June, we'll be a little bit more clear, at least for the first half. For the full year, I think we have collected to wait. Is -- my job today is not to let you dream, to be very concrete, to be very down to earth. I'm not negative, absolutely. We are -- continue to drive our car in the right direction. We are committed to create value in medium to long term. We have a global difficult momentum led by external situations. We have to pass through, we have to cut unnecessary costs, and be ready to jump on the rebound when it will be there. But the consensus is too early, and the COVID-19 impact for ourselves is strong. In terms of China granularity, let's start with the positive side. On the positive note, our direct selling business, as already said, is seeing some recovery improving coming from the off-trade with a clear shift, mostly 70-30 compared to 55-45, which is important for our model. Some very gradual, very slow recovery in the on-trade and very strong growth in e-commerce. What we highlighted in January is really there. So Q1 is not a very important quarter, but even inside a not-a-very-important quarter, inside the difficult situation, April is very good. It's running double digit, and our weight -- global weight of e-commerce, as already said, is more than 20%. It's more profitable. It's a different type of client. So we are very positive about these elements, and results are really nice. Still on the positive side, in terms of direct sales, some of our boutiques, LOUIS XIII, are showing good trends since Jan in [ Xian ]. Beijing has been more complicated because COVID lockdown is more important. And then also for a technical factor, last year in April, we had the anniversary of the SKP, so the commercial center, which we are -- we have our boutique. But the business fundamentals of this direct sales business are up there. On a more moderate, or let me say negative, on-trade recovery is very gradual. For ourselves, as already said to Trevor, best cities at this stage are Shanghai, Chengdu, Changsha, Shenzhen, reforming faster with the rate of recovery between 60% and 70%. It's more the popular bars revenue that recover, more on a whiskey side than cognac. So the best is yet to come. The occupation rate is around 100% for the 52-week days, but for weekends, it's better since mid-April. But inside this global scenario, we have to consider there are still very negative situation in the north, Beijing, and partially still at least for our channel in Guangdou and Guangzhou are main city of the South, which are important for Rémy Cointreau. While bars and restaurants are gradually recovering and opening, KTV clubs are yet -- not yet reopened 100%. So there has been running behind this fastest. And the last point is the indirect channel, so still 2/3 of our business. So worse sale of tier 1, 2, 3 and so on. Sellout and change level was very good. But COVID and trust and confidence is quite low. So even if depletion -- even if sellout was very good, depletion for tiers 2, 3 and 4 are a little bit slow because they need to be reassured by the global recovery. As you know, things when will they start will start very, very fast, and the speed would be recovered. At this stage, this kind of overstock, which in reality is not a overstock of a normalized sellout level, it's more a normal stock compared to a normal -- not normalized depletions environment, which is now determined by the COVID difficult situation. It's a lack of confidence in the short term that is blocking a little bit the indirect part. And on that topic, everybody will pay with weapons, yes. We'll continue to be coherent with our price equity and strategy. So we decided to postpone price increase for ethical reason, it will be in the second part of the year. But we do not go into -- dig into the game of deeper promotions that could be driven at this stage to try to catch up on selling basis. So we do not enter in that bloody game. There must be a little bit in the short-term of down trading globally, down trading in terms of quality of product, not in terms of valorization, per se, for each product because not only in China, but also in the U.S., in this moment, they are more the main SKUs like the VSOP and 1738 that are running better than the highest part of our portfolio. That is something which is temporary and will be reversed when the rebound will be there because luxury demand is still there and operating demand is still there. The rebound could be and will be even more strong and drastic than the lockdown situation.

Very clear. Just so I've got it crystal clear, just to my first question around the down 50% to 55% in Q1. I think you're saying that, broadly, most of the business is down around 30% and 40%. And then obviously, Travel Retail, which is close to 10% of your business, you've probably put a 0 in there given that China was empty. So that's...

No. I didn't say that, Edward. I said that the sales will be down, not business. Because at this stage, our sellout or our depletion element, we are not running at minus 30%. So because of the lack of confidence and shortening of the stock level, sell-in is more squeezed than depletion and final sellout. So this is for normal regions. Travel Retail on top is much more negative than that, much more than 50%. It is clear?

Yes. It's clear. So what do you think the underlying business would be in Q1 on a sellout perspective as opposed to a sell-in perspective, just if you have a view on that?

No idea, no idea. Because the underlying -- consider the sell-in, it is virtual because there is a lack of confidence. Therefore, in terms of -- this is not correlated to the sellout. Sellout is accelerating in some part. It's in hysteria in some part of the world and some states in the U.S. at plus 100% for acquisition speed of plus 40%. Depletions in the middle, with wholesale [ dancing hula hoop ], understanding if it can stand -- last forever or 2 months or 1 week. So the underlying of 3 question mark, mathematically, I'm not able to answer to your question. I have no idea.

Our next question comes from Simon Hales from Citi.

I think I've got three questions as well, please. I mean firstly, could you talk a little bit more about the cost actions you have been taking in the business to offset some of the top line headwinds? And what sort of things you've perhaps been doing over the last sort of couple of months and intend to maybe accelerate over the next sort of few months? Secondly, I just wanted to confirm a couple of, I think, sort of the points that you just shared to -- in relation to some of Ed's questions. I think you talked about e-commerce and that business being, I think, over 20% now of your global sales. Did you say that? Or were you talking just about China? And maybe you could talk a little bit about how that has trended over the last sort of couple of quarters in terms of that global e-commerce number? And also around the down trading comments you just mentioned. Is that a global trend you're seeing in cognac, back towards the sort of the VSOP sort of type -- sort of the quality level? Any more color around that would be helpful. And then just finally, you gave the on/off-trade split for China, which we've talked about a lot in the past. What's your on/off-trade split of business in EMEA and the Americas as things stand, please?

I'm writing that, please, because a lot of questions. So cost action. We took a lot of cost action, starting what we have done in the last quarter and all we've done for next year. In the last quarter, we have done a lot of things, but the result, the magnitude was lower than you might imagine because our fixed cost base is very important. For next year, it will be much more important because it's much more to do and much more viable. Having said that, A&P for the last quarter and the 2021 will be a cancellation reduction of all nonstrategic A&P spend. Very increased focus on digital because the new normal after the COVID will drive to a more digital, even more than before, relationship between brands and clients. Strategical spending is preserved by a lot of short-term, nice but not necessarily 100% will be -- have been cut. Very strong reduction in travel and expenses. Nobody is traveling, so there will be clear, visible action on the profit and loss 2021 and partially in '19/'20. Strong reduction on agency and consultancy fees. I have a real number, but I don't give you. So we are not -- we don't give specific numbers on these topics. Staff expenses, no salary increase. And also when you have a general increase, there is a delay for some countries. At the general compensatory increase, there is a delay in terms of timing. So everybody, every employee is participating as a global effort. Hiring freeze, only for some exception, but not before July. Cancellation of internal seminar, participation to external events. So a very strong cost reduction, rightsizing. We are not comparable to our competitors. We're not in the culture, as I already said many times, of announcing a big, big restructuring program. It is a very strong downsizing, rightsizing ongoing programs that we are performing by brands, by region, everywhere, and starting from the headquarter. On top of that, always on the cost part, it is public because we announced that there is the aim, the goal of the company not to -- at least in France, not to use profit of the state helps because we think that we have to play our part of social behavior and not to profit on the state help because we are still a very profitable company. Our balance sheet is very solid. Our liquidity is solid. So our social behavior is witnessed also by this act. Executive Committee decided, and it is public, the freeze of the fixed compensation for the next 12 months and very, very substantial cut on their variable compensation in the -- regarding the year '19/'20, which is very material, I can tell you. Also some delay in some long-term incentive program in terms of free and performing share. Also, the members of Board of Directors agreed onto a reduction of attendancy fees. This was for the cost. So more measures rapid on the short term could not drive to a direct important impacting as of May with much more details in the second -- for the next 12 months for 2021. It is important, both for social reason, for ethical reason and also to cope with the top line, which is starting with a minus 50% to minus 55% for 3 months. So we have to be able to cope with that to reduce impact on the bottom line because we want to continue to be profitable. We don't want to decrease a very strong extent the profitability of the group. Cost is not all -- the only thing. We have to consider also the balance sheet structure and the liquidity. Our balance sheet is very solid. You remember that the A ratio end of September was 1.4%. We will see -- I know it's bad, but we will see it in some weeks what will be end of March, which is very, very low A ratio. We published this common element, known element that the group also -- around EUR 300 million of excess cash on top of its estimated needs end of March 2020. And we decided also to take measures to contain our net debt or, if you prefer, to increase, even if it's not on a normative level, our free cash flow. So CapEx, capital spend have been reduced both for this year, but mainly for next year. So you have to visualize -- we said that normally for next year was EUR 70 million to EUR 80 million; now it is more EUR 50 million, something like that. And this year also will be lower than EUR 70 million to 80 million. Reducing the direct and directed purchases while preserving strategic buying. So we do not compromise on buying ordinarily or something which is important for our [ aging ] business, but for the rest, some -- not only cost action, but cash action. And last but not least, because it's very important in terms of action and social behavior of the company, it is public, the group will propose to its general meeting a dividend of EUR 1 per share for the year '19/'20, which is a substantial drop compared to EUR 2.65 paid last year, but you remember, everybody remember, included an exceptional dividend of EUR 1. So it's more a 40% decrease because it's EUR 1 this year to be compared to a normative EUR 1.65 with an option to pay the dividend in cash or in share for the entire dividend distributed. In this context, the group's majority shareholder has already expressed his wish to opt for a full payment in share. And we think that considering the share value at this stage and the potential of the group, a lot of our shareholders will take this option. So we'll be not only saving in cash, per se, because EUR 1 compared to EUR 1.65, because also the script option chosen. So a lot of measures. E-commerce, the 21% was for the weight on top line of e-commerce for China Mainland. At worldwide level, it's much less. And in other regions, we have a lot to do to potentialize this e-commerce. One figure in the U.S., even if there is some rules -- constraints, in this moment, we are booming. We do briefly, so plus 300%. So we have some experience on -- a very positive one, but on a very slow base. The 21% was only on China Mainland. And clearly, the e-commerce will be one of the main channel which we will improve our presence or performance in the next coming years. Down trading trends, what I mean? I mean that in this moment of difficulty, it is more the central part of our portfolio which is performing, compared to the upgrade. But please remember that end of last year, 54% of our business was done with products whose retail sales price is higher than $50, but 80%, 81% last year, was done -- realized with products higher than $40. I'm talking about -- of products that -- for VSOP is between $40 and $50. I'm talking about 1738, which is at the limit between $40 and $50. And I'm talking about CLUB, which is far higher than $50. So it is down trading in terms of maybe our top line is that do not mathematically transfer in the same negative impact in terms of net contribution, because sometimes, you have to invest more in some upgraded products compared to the much more mainstream, if you say, with a much more feasible mass product like VSOP. So it is something which is slightly negative for the average revenue per unit. So for the net sales valorization could be marginally negative for the gross margins in the short term, it is not automatically negative for the bottom line. Split on-trade/off-trade. We are much more off-trade in other regions than, obviously, in China, only exception being 50-50, something like that, in South Europe. Spain, Italy are much on-trade. But globally, the exposure of the group at this stage is much more off-trade. Could be a strength in the short term. Please remember that on-trade is very important as well. So out of this strange period, when things will be back to a more normal situation, the on-trade side will be there for us because we need to accelerate a lot on this channel. But as far as we speak, the on-trade was stronger in China than in other region with the exception of South Europe, which do not account the impact of our total and our operating profit.

That's really clear, Luca. Can I just check, just on your comments around the cost you're pulling back on A&P spend, what percentage of your A&P is actually strategic?

Could you check? Do you think that I will give you this answer?

Well, I'll give it a -- like, I was hoping, you...

Nice try. Nice try. No, I don't give you. I don't -- I can't answer to this question.

Our next question comes from Richard Withagen from Kepler.

I have two, please. First of all, on the U.S., on the VSOP product, Luca, I think you sort of undersupported it a bit in the past. So what are you doing to reinvest back in VSOP to get the -- that part of your portfolio growing again. And then the second question is on the start-up of the sites in Cognac and Angers. So will they be going back to normal capacity or, because of restrictions, will they be at lower capacity? Maybe you can give some color on that, please?

In terms of manufacturing capacity, are you talking about?

Yes, exactly.

Okay. That would be gradual. It is -- they'll specifically gradual but volatile because at this stage, clearly, global overall, we start to answer to the second one. So the global overall, the expectation are negative for next quarter. But the differences between countries, formats and change in demand planning are quite important. So this thing would be a gradual capacity rate increase with a lot of flexibility, which is demanded. So our manufacturing directors, our plant director has a very important job in this moment, because they are obliged to adjust their production tools and people working in the plants. According to this demand that is very volatile, it's negative and very differentiated. So it's very complicated at the site. Overall, will be a gradual recovery. But I would like to properly request and also to thanks all the efforts that at plant to supply chain level people are doing because these things are very complicated. Having less order to prepare and to produce is maybe more difficult because the estimation is much more complicated. And for sure, the most important thing in this context that we want our employees to be protected and their health is on top of our worries, for not only in plants, but for every part, every site of the company, here in France and in any part of the world. VSOP support. We are clearly planning to reinvest more behind the brand and to better target our clients. At the same time, we are very positive. Why? The strong performance of VSOP during the panic-buying pantry loading of the past few weeks is a very good news. It shows the brand equity at retail at consumer level remains extremely strong, so need to be fair, but to be increased with support, but the natural top of mind is very strong. The UNA indirect survey that is performed by the panic buying, break down showing that VSOP and also 1738, more than we expected in this moment, are reacting in a very strong way. So for sure, we'll reinvest more behind this brand. And as I said, even if there is a short-term negative impact on the gross margin compared to the weighted average of the brands for all products because we have more VSOP [ certificate ] compared to more upgrades, this is not the same consequence on bottom line because of the size of the share, the size of the figures. In any case, your question is very important because after the COVID, there will be things that would never be the same. So in our opinion, we have to profit of this strong worldwide crisis for our company to be able to touch 5 points in a different way, maybe or partially differently compared to what we have done before, but the clients through digital in more deep way. I will not elaborate because our strategy, that's clearly a client touch point, more and more digital. We have to understand this kind of new breakthrough occasion, virtual [ aperos ], online clubbing, cocktail-at-home, what will last and what will evaporate? That is a clearly a new way of consuming our products, not only for ourself, for everybody. There will be the necessity to have a different segmentation our clientele, because people that are financially fragile probably will be more impacted by the crisis. There will different standards. There will be [ conscious of ] clients. So a new segmentation, and it will be addressed. So a lot of market intelligence job. And then the last 2 points are very, very -- the most important. The crisis shows that the brand needs to improve, not Rémy Cointreau, every brand to improve in terms of the engagement with their audience, and the new consumer journey is to understand the emotional mindset to create something. Because the consumer-client [ finance ] opportunity after the crisis would be on this value anyway. All commercialism and opportunism will be penalized. That's our combination and we'll try also to switch part of our investment on that topic. And on this element, I'll always be qualitative and never quantitative. You might understand why, because it's too strategic to disclose that on a quantitative basis. But it's very important to share that things are changing, maybe forever on some topics, and between dialogue with the customers, with the clients.

Our next question comes from Olivier Nicolai from Goldman Sachs.

Luca, I just have one question, actually. On Travel Retail, I mean, Travel Retail, obviously, as you said, likely to be heavily impacted and lastly, to be the last channel to recover, even probably beyond Q2. So I was just wondering how much of that demand you would expect to see moving to the off-trade channel, or in your experience, travel retail is just purely impulse purchase.

Difficult question. So part of the business at this stage is no more. So we need to start travel again to have some EBIT to be there. So the automatic transfer to the off-trade is not so easy at this stage. We have witnessed some example in some part of the world. There is some correlation, for instance, between the net situation of Travel Retail Americas and the good performance of some customers in Latin America as well because the markets are more touchable; borders are more not so far from classic hotel retail activity. But at this stage, it's very complicated, impossible to try to modelize would be the transfer between travel retail, usual spender, that now being at home, transfer in off-trade. Because part of the purchases of travel retail were based also not only on convenience, but also on the occasion, on the visual exposure of the brand. So part of the travelers will not buy at this state. At the same time, we are probably in a better position compared to some competitors because our promotion level intra-retail deals was far lower. So the competitive part that travel retail spender is looking for, for our brands, is less important. But at this stage, we are not targeting a huge increase on local market because of the travel retail collapse. We have experienced some positive experience. We have some positive indirect element because we did not enter in big promotional level inside of retail, but we do not have a clear answer in term of transformation at this stage.

And our next question comes from Chris Pitcher from Redburn.

Two questions. Firstly, you said it's very hard to say what the sell-out is currently, given all the moving parts in your business, Luca. But you've given us a very specific estimate for COVID impact in Q4. Can you give us a bit more color behind that GBP 36 million hit and split by China Travel Retail? And does it include a positive estimate for the stockpiling that you referred to in the U.S. and Europe. And then to help us think about China, can you say how much excess inventory you think you have and need to work through before shipments do start to match depletions? And then finally, you're saying you're not pulling back on [ ODV ] purchases. Can you say what [ ODV ] price inflation was in the last buying round? And are you seeing competitors keeping up their purchasing levels? Or are you seeing any potential of price deflation if other players perhaps buy less?

So on a very high level, because we do not disclose that, but we can say that EUR 36 million for the top line impact for Q4, we can say that between 70% and 75% or EUR 36 million are on Asia Pacific. And it's not only China and Asia, but also Travel Retail Asia. Retail Asia is part of that total and the 25% -- 25%, 30% remaining, it is 2/3, 1/3 between Europe and U.S. U.S. on the third -- U.S -- Americas, sorry, more than U.S. inside the EUR 36 million is the less represented on the Q4. It's not the same thing on the estimation for the 2021, that at this stage, we do not disclose. We will talk about that quarter-by-quarter and global highlights starting from the 4 of June. At this stage, I don't want to disclose our global estimation for the next year. I already said that it's important compared to the size of our business, both in top and bottom line. In terms of -- yes. Yes. For sure. Yes. In terms of stock, the -- I think we are in a good position. We are not overstocked. But it is the normative depletions that, at this stage, is totally out of this world. We do not in any normative. So everybody seems to be too stocked. And then maybe tomorrow morning, panic buying in the U.S. or confidence in China could be the opposite. And the same speech, the same talks will change because of the confidence. So our stock in trade at this stage is quite fair. We don't seem to be overstocked in absolute value. We are overstocked in terms of the expectation of the short-term on the COVID basis of our partners. In terms of prices of [ ODV ], the slowdown overall in the last 2, 3 years. But we run for the best qualities. We are only [indiscernible] in champagne. And if you want the best qualities, there are always a premium price to pay. So there is a low single-digit to mid single-digit increase in average to be considered because we want to have the best qualities because this fits with our global strategy to be -- to have the best cognac in the market. We are 100% [indiscernible] time, which is not the case for our major competitors.

And so within your CapEx guidance, you said nearer to EUR 50 million. That still includes expansion of warehousing because you'll have to put it somewhere to put -- pull back on production.

No. All included. Let me a little more clear on this element. CapEx. For '19, '20, I said to you many times, EUR 70 million to EUR 80 million. I think that we'll be ending between EUR 65 million and EUR 70 million. For 2021, we anticipated the same year, EUR 70 million to EUR 80 million. I think that you can modelize EUR 50 million to EUR 55 million. Everything inside capital expenditure, only capital expenditure for the existing business. For the guidance in strategic working capital, that include what you just asked. Overall, the incremental variance that we guided for was at EUR 50 million to EUR 60 million every year to increase in terms of cash needs. At this stage, we want to remain into the EUR 50 million, EUR 45 million to EUR 50 million without any compromising on [ ODV ]. So huge barrel also on other part of the working capital. And now we understand why we are also very attentive to the account receivable, as [ Antoine briefed ], we do not want that because it is sometimes, quite always, short term, and we are not interested in it. We want to preserve the strategic buying, the strategic increase the working capital. Let me give you one additional element of profit and loss that you do not ask, but I think it's very important because otherwise could be a surprise for the 4 of June. I guided for 33% to -- 32% to 33% in tax ratio for the '19/'20. Probably, it will be much more in the 36%, 37% because COVID impacted part of Asia sales and bottom line very strongly. So it is very France-driven, very European-driven profit for this year. So for the geographical reason, the expectation of tax rate for '19/'20 will be between 36% and 37%, which is a negative element compared to the previous guidance. But for -- I have to tell you that. So even if you didn't ask.

And our last question comes from Laurence Whyatt from Barclays.

Two from me. Just getting to your [ specific on-trade ] declines in Q1. Can you tell us what your assumptions are, particularly in Europe and America, on the sort of return to the on-trade in those 2 parts of the world? Obviously, we've seen quite a slow return to the on-trade in China since that's reopened. Europe and the U.S. still largely remains [ leg ] down, if you think of the timing and quantum of return in the quarter. And then secondly, you put through a decent price rise last year, particularly in the U.S., and we saw that come through in the price mix, but obviously quite a negative volume number. Is that volume number in line with your expectations when you put that price rise through originally? Or how does it compare?

I didn't get the second one, sorry, because it's quite disturbed. Can you be very clear on the second one because there is noise on -- and very straight to the point.

How did the price rise that you put through last year and the effect on the volumes, how does that compare to your original estimations and assumptions on volume?

So Q1 assumption, more on U.S./EMEA region. So for the U.S., at this stage, what we are seeing, that's we are at minus 18% to minus 19% on trade. So it is 0. And the off-trade globally is negative, but in sell-out, it's very positive. So part of our assumption is that the on-trade will recover, but very progressively. So we are not putting a lot of pressure on that. And so we are not linked to the strong recovery in on-trade in the U.S. and including on the positive note, some margarita kits and cocktail deliveries in some states. So converting some nonexisting at this stage on-trade places into consumption at home that -- so there's a conversion between [ x-off ] on-trade and [ add-on ] off-trade. On the off-trade, we are not -- we are quite cautious and not very bullish on the automatical transfer of this pantry-loading panic buying into acceleration of shipment division. So it's very gradual. So at this stage, in terms of these 2 channels, our Q1 expectation, it is quite realistic. It's not so much under pressure, in my opinion. Increase in the e-commerce and digital, plus 300% [indiscernible] , best-performing operator, on small [ bucket ], smaller element. In terms of qualities inside the U.S., as I said, VSOP, 1728, Cointreau as the key forces which we bet for the next quarter. In terms of Europe, it's a more complicated because it's by subregion. And on the positive note, U.K. is a little bit reacting in terms of off-trade performance compared to expectation, it's better. So it's a little bit on the same Anglo-Saxon / U.S. EBIT that we are witnessing. So that's quite positive. Some small positive news on Benelux. It's important for symbolically because for many years, 3 or 4 now, we are struggling. Western Europe for the rest, quite negative and South Europe, very negative. So also for EMEA, out of the technical positive element on Russia because this just part of last year was 0, because there's some commercial problem with a big operator that are now starting or being sold. We are not so bullish for the first quarter. So we can say that for U.S.A. and EMEA, we have a reasonable and not so aggressive hypothesis. That is minus 50% to minus 55%. So we're not selling you gold. It's minus 50% to minus 55% still. But we hope that we should be able to realize this estimation, not having a negative surprise on the top line. The second question is much more complicated because clearly, we had much lower volumes compared to what we expected in the reality. It is linked to the price increase that was made twice. We went too far or is the additional reason. In our opinion, repeat is that there were more -- the external reason that penalized our performance that the strategy was the right one in terms of pricing, because the timing of price increase was clearly not the same compared to our major competitors. The market is still driven by a quality, yes, in which we are not playing. And if there is a negative element that was related, but it was performing better than expected in the competitive arena, is more to say than others. So partially action of the competition. And we don't think that having increased 2 points less our prices would have changed the global output, quite the opposite, quite the opposite. Because doing that, we were able to have on some quarters, some acceleration with some programs with some activation that without the price dynamics will not be there. So we do not think that our strategy was a failure per se. We think that's external condition, a market driven by [ VS ], and some initiatives were better than expected. A point that we want to readdress, and i.e., the question before, is to reinforce support in advertising and useful promotion, not price promotion, but useful below the line initiatives to support our main pillars. To switch a little bit more the advertising and promotion, product mix on cognac, on VSOP and 1738 compared to our vision, 18, 24 months ago. Because prices is -- are only the result of the strategy, as Eric Vallat, say every time. He's right. And all the strategy has to be there, performed. As a consequence, the price value will be more valuable for a given customer. So it is the support to this brand that need to change more than negative pricing. This year, we are not giving a comparison on U.S.A. We are switching, delaying the price increase because of ethical reasons. [ Default ] was not the right thing to do to increase prices as expected January, the first of April because of COVID. So it will be done later during the year, but it will be done. So we are not giving up on that. We are not transforming ourselves in a mass-market short-term company in U.S.

And perhaps just to follow-up on the last bit and refer back to an earlier question, where you were talking about the quality of your products, in particular, using [ petite grande ] champagne, [indiscernible] and the like and having a higher [indiscernible] rather than competition generally being on beer. Do you think your consumer understands the difference between your products and the local competition among similar price points despite not necessarily being at the same VSOP or level of 1738.

I think yes. Our -- everything show rate without disclosing, it's very strong. It is the touch point more the element. They need to know us and then if we go to dinner, that will be a second dinner, then a third one. So we have to get in touch with the client. We have to get an appointment, and to get out to explain who we are. When they get in touch, well, they are in love.

And this concludes today's question-and-answer session. Mr. Marotta, at this time, I will turn the conference back to you for any additional or closing remarks.

Thank you so much, everybody. So this is very important thing for today is that I hope everybody is well, is healthy as well his body and his mind, and everybody is in good shape in this very complicated moment. The year has been a year in which we were under pressure, for sure. We'll be more precise in terms of results, quality and profit and loss model for '19/'20 in next year to come in term of model, not in terms of guidance on the short-term on the 4th of June. On the positive side, I need -- want to realize the fact we are now on the lowest side of the fork of the result for this year, '20, published in '25 in organic. We have a very solid company in term of balance sheet, ratios and the stock we have give you the glance that we are here will be there for the future. We have the right weapons, in our opinion. And there is a short negative momentum that oblige ourselves to take some measure on cost, but all strategic initiatives will be preserved, starting from human resources because human resources are most important thing. Thank you so much, and talk to you the 4 of June for the year end result. Stay safe. Ciao.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.