Rémy Cointreau SA (RCO) Earnings Call Transcript & Summary

Hello, and welcome to the Rémy Cointreau Q2 Sales '24, '25. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Luca Marotta, CFO, to begin today's conference. Please go ahead.

Hello, everyone. As you've seen in the press release, Q2 sales were down 16.1% in organic terms. This performance reflects, first of all, continued destocking in the U.S. on the back of a persistent weak depletion and more importantly, below our expectation. Second element, high basis of comparison and clearly a tougher market condition in China and more broadly for Chinese cluster -- Greater China. And third, a soft context of consumption in the rest of the world, alongside a strong promotional activity. Overall, Q2 sales decline is split between a volume decrease of minus 8% and minus 8.1% of price mix effects linked to the limited price increases and the outperformance of Liqueurs & Spirits compared to Cognac. Looking at the overall sales performance by region. Americas generated a decline of 22.8% in H1, reflecting continued destocking, as said. Depletions are obviously still too low, but every cloud has a silver lining, and we can at least admit that they are sequentially improving. APAC recorded a sales decrease of minus 8% in H1, including the relatively limited decrease in China, which represents clearly the major part, and a weak performance in Southeast Asia, especially for Cognac. Third, EMEA, big EMEA region, was down 18.8% affected by persistent soft consumer trends and unfavorable weather condition. This was selling. In terms of value depletion at group level, the best approximation of final sellout over the past 6 months. In the U.S., value depletion were down mid-teens, as compared to pre-COVID, value depletions are flat and out of the SOP -- excluding the SOP, plus 45%. In China, value depletion were down low single digits in H1 versus last year clearly, and up more than 35%, 3-5, compared to '19/'20. On top, I have to add that in Q2, value depletion in China were slightly up. However, base of comps last year were quite easy. Last, but not least, in EMEA, value depletion were down low double digit versus last year and down mid-single digit compared to H1 '19/'20. But excluding Russia, because it's not comparable 5 years ago, value depletion would have been flat versus 5 years ago. Overall, at group level, 6 months value depletions declined by low double digit versus last year, i.e., slightly better than sell-in on a 6-month basis. If you remember, end of Q1 was the other way around. So albeit we remain negative, clearly, on the second quarter, there is a slight small spark in terms of reverse trends in terms of value depletions comparing to the selling performance. On a 5-year basis, group value depletion were up low single digit, in line with selling trends, which are plus 1.5%. So for 5 years, quite balanced. To conclude on this very important slide, considering what's happening and the result differences, we have decided to adjust our full year guidance taking into account the persistent low visibility, disappointing sales at the end of Q2, and worst market condition in China. On Page 3, I would like to come back very briefly on the main marketing initiative of the quarter, and Éric Vallat, our CEO, will develop the strategic rationale behind them in a more deep way -- in deeper way in the months for the H1 results. Starting with the U.S. First of all, we have started to reinvest behind VSOP at 360 degrees to improve its visibility and the conversion rate. Here, there's one illustration with a limited edition called My City, that will be activated in 4 important series in Q4, Detroit, Atlanta, Chicago, New York. In parallel, we continue to pursue our investment on our core business, 1738, through the current tour sponsorship of Usher across the U.S. with important activation plan in both off and trade. And last, we are preparing the relaunch of Rémy with a new pack, more modern, more dynamic, a new blend, lower ABV, and a new price position to revitalize volumes. The campaign will be quite offensive and target primarily the new generation of women in the spirits space. Full plan will be live from April next year in 2 states and then a rollout all over the 2025 year. In China, as mentioned, the market is tough for all the industry and more largely the customer space. In this context, the objective is clear to leverage our biggest strength to make our performance as much as possible resilient. Rémy Club is definitely one of them alongside e-commerce in terms of channel. And then in Europe, we have decided to launch, as an example, our own premium RTD offer in the U.K. as a pilot market with Cointreau, our most relevant brand on the cocktail landscape. It is a very new test, learn approach and with a very limited scale and exclusive at the Waitrose retail chain. Now back to figures. Let's move to Slide #4 with H1 sales analysis. Sales amounted to EUR 533.7 million, down by EUR 103 million year-on-year or 16.2% on a reported basis. This reflects from one side, a strong organic decline, a bit more than EUR 100 million, EUR 101.4 million, which means minus 15.9% organic sales decrease in the semester. This performance needs to be split between minus 13.5% of negative volume effect and minus 2.4% of price/mix. Regarding the latter, this is a combination of a neutral price effect and low to mid-single-digit negative mix effect linked to the underperformance of the Cognac division compared to the overall group. Second point, there is slight negative currency translation impact of EUR 1.6 million or 0.3% loss for the semester. The loss was mainly driven by deterioration of Chinese yuan for EUR 1.6 million, and Japanese yen for EUR 0.5 million. But on the opposite side, U.S. dollar was positive in terms of conversion for a limited gain of EUR 0.2 million as well the British pound for EUR 0.4 million. Slide 5, the -- performance by division, comparing actual trends out of the performance to 5 years ago, prepandemic, '19, '20 H1. I will not detail all the figures. They are all on the spreadsheet on the slide. But in a nutshell, value performance is strongly down in Cognac amidst the current U.S. context, while price/mix continues to be very strong. Overall, total Cognac sales are now down 10.4% versus pre-COVID, while value depletion are down low double digits at the same time. In parallel, Liqueurs & Spirits continue to generate significant performance of plus 38%, 3-8 percent, versus pre-COVID, driven by both volume and price/mix. And value depletion trends grew even more than 40% over the same period. So clearly, different speed of ideas between the 2 divisions. At group level, this shows now an alignment, as already said, compared to 5 years ago, in terms of sell-in, more or less plus 1.5%, and value depletion at group level, which are now slightly up, precisely plus 1.3% compared to H1 '19, '20. Now let's now turn to Slide 6 to dig into organic trends by region at group level. And let's start with APAC, where H1 organic sales were down 8%, as said, but up 42.2% on a 5-year basis. Let's start with the valorization. So value creation -- volume value equation, the performance year-on-year is equally split between a negative price/mix effect and negative volume effect linked to the Liqueurs & Spirits division. China's sales were down mid-single digit in Q2, representing an increase of more than 80%, 8-0, on a 5-year basis in a market facing tougher market conditions, particularly for the high-end segment. In this gloomy market, the only channel which emerged positive was the e-commerce, grew at more than 10% in Q2, representing 25% of sales penetration, end of the H1. The overall performance also reflect the strong negative impact coming from Taiwan, Macau and Hong Kong, as well as softer trends in travel retail in the APAC region, where travelers are back, but spend less. In this context of sell-in of sales down mid-single digit in China, H1 value depletion group level were down low single digit year-on-year, including, as already said, it's very important, a slight increase in Q2. On a 5-year basis, H1 value depletion were up more than 35%. Moreover, considering the better resilience of depletion versus sell-in, our level of inventories remains healthy at the end of September. The remaining part of Asia continued to be affected by tough market condition in Southeast Asia in Q2, particularly in Australia, Malaysia and Singapore. Meanwhile, at the same time, Japan continued to outperform even if on a slight lower trends compared to Q1. End of September 2024, APAC accounted for 44%, 4-4, of our group sales, up 4 points compared to the previous year. Second region in terms of weight is Americas. Americas H1 organic sales were down 22.8%, including a negative mid-teens effect in volume. More specifically, in the U.S., sales recorded a very strong decline in Q2, impacted by another round of destocking given the persistent weakness of depletion. Given the sequential improvements, however, in depletion from Q1 to Q2, level inventories has lowered EBIT is now slightly below 5 months at the end of Q2, always comparing to the expectation due to depletion. On a 5-year, H1 value depletion are down now mid-teens year-on-year and flat versus H1 '19/'20, but excluding the SOP plus 45%. In Canada, sales were flat in Q2, supported by Liqueurs & Spirits division performance and Latin America was down low double digit in part, especially by Cognac. End of September of 2024, the Americas accounted for 34%, 3-4, group sales, down 3 points. And then we have EMEA. EMEA H1 organic sales were down 18.8%, almost flat compared to 5 years ago. This year-on-year performance most includes a very strong negative volume effect. To the changes of organization announced last June, we monitor now the performance with this big region with a different split as displayed on the slide. So first of all, we have the class of Europe third-party distributor, 3PD, recorded a slight sales growth in Q2, led by Germany, Greece and Italy. In parallel, sell-out has slightly improved as well, led by Metaxa, even if the spend per capita remains subdued and weather conditions were unfavorable in the summer. Second cluster, U.K. and Nordics, strong -- down strong double digit in Q2, impacted by high comps and a gloomy economic context. The objective has been to protect our market share in Liqueurs & Spirits despite the declining categories environment. Benelux and France third one, we recorded a slight sales decline in Q2, impacted by Cognac, while at the same time, Liqueurs & Spirits showed good dynamics in summer. And then last, but not least, MI and ex-Eastern Europe, sales were down strong double digit in Q2, impacted by Nigeria, for instance, which faced some destocking following a change route to market, and as well as South Africa still affected by a highly promotional market and mostly driven by the VS segment. Over the last 6 months, value depletion at all EMEA region were down low double digits year-over-year and down mid-single digits on a 5-year basis. But excluding Russia, value depletion would have been flat compared to 5 years ago. So overall, consider this comparative performance level of inventories remains healthy in the region. End of September, EMEA big region accounted for 22% of group sales, down 1 point compared to the previous year. Now, let's switch to Slide #7, the analysis by division, starting with Cognac. Cognac posted an H1 organic decline of 17.5%, reflecting a decrease of 14.2% in volume and negative price/mix of 3.3%. At the end of summer 2024, Cognac division accounted for 64%, 2/3 of our sales, down 1 point compared to the previous year. And let's start with APAC, the most important region at this stage of Cognac. In China, inside APAC, sales which represented most of our Cognac exposure in APAC, were slightly down in the Q2, affected by high comps. China is up at more than 90% versus Q2 '19/'20. Tougher market condition in domestic market and in travel retail as well. In a nutshell, consumer confidence remains a bit low, cash pressure are affecting wholesaler and the luxury shaming waves indirectly on the high-end segment. However, on the value depletion side, we were slightly up, I repeat, slightly up in the Q2 year-on-year from a slightly more favorable basis in terms of comps and were mostly driven by Rémy Club, which overperformed up mid- to high single digit year-on-year on this period. On a 5-year basis, value depletion for the China were up plus 60%, 6-0. On-trade is once again the most affected channel in this current context, while -- and this is something very specific and which I'm very proud, e-commerce was up more than 10% in the period. Hong Kong, Taiwan and Macau were weak impacted by high comps, destocking, and we can call it wait-and-see attitude before the tax decrease in Hong Kong. Rest of Asia was down a very strong double digit, particularly impacted in Malaysia, Australia and for Cognac specifically in Q2, Japan as well and softer trends for Chinese tourism in these kind of countries. Second region for Cognac in terms of weight, Americas. North America Cognac sales were down by a very strong double digit in Q2, still impacted by destocking, although on the back of lower-than-expected depletion and a very high promotional market. Q2 U.S. value depletion were down mid-teens year-on-year and minus 10% versus Q2 '19/'20, showing a negative performance, but a sequential improvement compared to Q1, mainly led by 1738. Considering all that, the level inventories-- on Cognac is now slightly below 5 months in terms of days of coverage. 12 months value depletion, if you can see in the slide, includes 3 points of negative mix effects year-on-year at the end of September and back on a 5-year basis, price/mix is up 16 points. Finally, Latin America sales were down a very strong double digit in Q2 impacted by strong fierce promotional competition. Third region, in terms of weight for Cognac, EMEA. Cognac sales were down strong double digit in Q2, mostly impacted by Nigeria, change in RTM, route to market, as said, and tough market in South Africa. U.K. continued to face high comps ahead of the rise in excise due to last year and fierce promotional environment this year. And Europe third-party distributor, Europe 3PD, improved sequentially in Q2, led by Germany, Greece and Italy. This was in terms of sales, but EMEA value depletion, EMEA validation were down mid-teens year-on-year in Q2 and down strong double digit compared to Q2 '19/'20. Let's now turn to Slide #8, a word on Liqueurs & Spirits division. Liqueurs & Spirits division was down minus 12% on organic basis in H1, including a very strong decline of minus 12.6% in volume and a slightly positive price/mix effect of plus 0.6%. End of September, Liqueurs & Spirits accounted for 34% of our sales, up 1 point compared to the previous year. Now let's review the performance of the division by region and here, #1 in terms of weight is Americas. North America, sales were down low double digits in Q2, still impacted by greater caution by wholesaler. From the wholesaler, willing to maximize their global inventories footprint in a slowing market. However, the underlying trends show some resilience compared to the market. Cointreau Q2 U.S. value depletion were up low single digits year-on-year and approximately plus 65%, 2/3 better than Q2 '19/'20. Botanist, our gin, showed also some positive trend year-on-year, plus 10% versus last year, and almost 100%, plus 95% versus Q2 '19/'20 in terms of value depletion. Besides all that, price/mix was down 3 points versus last year in the last 12 months, period ending September '24, but up 20 points on a 5-year basis. In parallel, Latin America sales were up strong double digits in Q2, led by Cointreau and Mount Gay. Clearly, Latin America, Liqueurs & Spirits division was more dynamic than Cognac. Second region in term of weight for Liqueurs & Spirits is EMEA, where sales were slightly up in Q2, showing a strong improvement versus Q1, led by France, Germany, Greece and Spain. In parallel, value depletion were down low single digits versus last year in Q2, but plus 45% versus 5 years ago. Inside of that, in terms of countries, while Benelux shows a very strong growth led by Cointreau, the U.K. faced high comps and a declining market where the group has protected this market share. In parallel, euro third-party distributor cluster showed some good dynamics led by Metaxa and Cointreau. Eastern Europe was impacted, however, by some destocking following changes in route to market in Czech Republic. Third region by weight, APAC. In APAC, we had clearly China, posted a very strong double-digit decline in Q2, impacted by continuing destocking in whiskies and a weak end demand, mainly from a younger generation. Overall, value depletion was slightly positive, however, versus last year, increased by 15% versus 5 years ago. So it's really an issue of destocking. Rest of Asia posted a mid-single-digit increase in Q2. Inside that, while Southeast Asia was flattish, facing large market consumer conditions, mainly in Australia, Japan was booming from the division, driven by Bruichladdich and Cointreau. One last small world on group brands, which now represent 2% of the group sales, stable year-on-year, they were down 25% in H1 or minus 18.3% versus H1 '19/'20. To conclude, basics before Q&A session. On the back of Q2 sales, we showed disappointing trends and considering the persistent lack of visibility and worsening market conditions in China, we have decided to adjust our full year guidance as follows. On sales, we now expect another year of double-digit decline in organic terms for the full year. And op margin, operating profit margin, we now expect an organic deterioration that will be partially offset by the launch of another cost-cutting plan totaling over EUR 50 million, 5-0 million, in terms of impact of this year. This new guidance is based on the following assumptions, in terms of region. In Americas, we do not expect any recovery in sales before Q4 '24/'25 at the earliest. In APAC, we should record a sequential sales deterioration in H2 compared to the H1. And EMEA, we should continue to face sluggish consumer trends in part of the year. To manage the top line pressure, clearly, which is important, we have decided a repeat on top of the ongoing strict cost policies -- policy to launch another cost-cutting plan of more than EUR 50 million, 5-0, to protect as much as possible our op margin. For the sake of clarity, this '24/'25 guidance for this year takes into account the recent MOFCOM decision based on the information that we have as of today. The impact of this decision in terms of profit and loss for '24/'25 is marginal for us. Lastly, we reconfirm our '29/'30 midterm guidance. But let me be clear on that. '24/'25, as said, with the year transition with highlights including penalization of destocking in the Americas and starting from '25/'26, we'll make a resumption of the trajectory set for '29, 2030. '29/'30 is confirmed and starting from '25/'26 will be a high single-digit annual growth in sales on average an organic basis progressively, and a gradual progressive organic improvement in current operating margin. This '29/'30 guidelines doesn't mean that according quarters, years symmetry between top line and bottom line, will be assured on the same basis. I repeat high single-digit growth in sales leverage, starting from '25/'26 and a gradual, gradual, month after month, quarter after quarter, improvement in current operating profit, but with no grants of the same symmetry. Thank you for your attention. And now, I am happy to answer to your question, but before I have to drink because I have no more breath. I need water. Thank you.

[Operator Instructions] We will take our first question from Edward Mundy from Jefferies.

So 2 questions, please. The first is on U.S. Cognac, where you're signaling that the Q2 depletions, while still negative, are slightly better than the first quarter. Could you perhaps provide a bit of color what's behind that? Is it the SAP relaunch or that the new commercial organization? And how sustainable you think the sequential improvement in the U.S. may be? And the second question is around the guide. China sounds okay in Q2, U.S. is slightly less bad. I appreciate visibility is very low. But are you trying to signal that the timing of recovery is being pushed back versus your prior expectation? Or are you trying to signal that H2 organic sales will deteriorate versus H1? So a bit of color on the top line. And then on the same question on the guide, from a profit standpoint, appreciate that there are still some cost savings from last year that need to come back into the base, but perhaps you can provide a bit more detail around the EUR 50 million of cost savings? And do you think operating deleverage will be worse in fiscal '25 relative to fiscal '24?

Thank you for your question. So let's start with the VSOP launch. The plan, it is running through, starting with the price reposition specific in some states, as you remember, up and down, following the strategy of revisioning that has been decided, 49 and 99 and it is starting to give some small -- some initial fluids, but need to be followed by also for a specific activation and marketing initiative to be coherent with -- there's not only price. There needs to be assisted by some activation and focus on the field. As said, in the last 2 years, we are a bit forgetting to Brexit VSOP, focusing on more strategic, what we consider the time, much more strategic SKUs like 1738 and XO. So it is running. It is not yet totally visible end of Q2, but to give you some example, first sign of exit rate on October in VSOP are showing some positive depletion on VSOP overall, all U.S. And in some states, since July, it is the case, an important late states like Michigan, the states where we're more affected by this price disalignment [indiscernible] even before now. So not yet visible global basis, it would be a little bit long goal. But month-over-month and week after week, we are seeing some positive sign. In terms of guidance of top line of the H2, at this moment, you can be much more precise because otherwise will have precise work with specific number. So we'd assure that in our forecast, we think that Q3 would be the toughest quarter and Q4 should see a bounce back at least for the U.S. in terms of top line. I'm not committing that Q4 will be positive for the group at global level. But for sure, I think, and we can commit that the Q4 in sales for the U.S. will be positive also by the fact that the comps. You have to remember, the last year, in the Q3, we made a huge performance of sell-in in the U.S. and this plays a role in terms of comps. Where do we stand -- will we stand in term of top line, qualify this double digit, we will have much more occasion, many occasion in the future to be able to process that. So far, this is our assumption. In terms of cost base, the EUR 15 million is a combination of all nature of cost. I will not be precise today because it is a sales and trend of depletion to try to understand what's happened to the top line for the next future. We're much more precise end of November for H1 result, but I can say to you already, that is a combination on the cost linked to the manufacturing, supplying, A&P also to try to reset the base considering the top line. Ratio versus sales will remain very high compared to our history, compared to peers, I can ensure that. And I can commit already now on overheads that we'll be able, through this cost-saving plan, to offset the EUR 30 million of temporary cost reverse that we have and overheads at the end of the year will be flattish at worst. So maybe also slightly negative. So consider the context after EUR 145 million, more than EUR 50 million, which we are committing now is very important. But as said, our business model is made to support sales that needs to grow high single digit. At one point, cost saving will not solve the operating margin equation because the top line impact is clearly material if you combine '23, '24 and '25 -- '24, '25.

We will take our next question from Olivier Nicolai from Goldman Sachs.

I've got 2 questions. First of all, on the U.S., I mean if we take a step back, the Cognac category is about down 20% in volumes as compared to before COVID and much more than most of the other spirits categories. So what do you think the Cognac players, including Rémy, of course, have made, I should have done differently, but do you expect Cognac should recover the long run? Its flattish share and how? And second question, I know it's a sales update, so I guess, I would love to ask this one perhaps in a month time for more details, but Rémy has a strong balance sheet. So first of all, can we expect the cash conversion ratio to go back up significantly this year? And how should we think about the potential for share buyback considering your current valuation?

Thank you so much. So once again, even if the cyclical impact is lasting quite long and much longer than expected, we don't think it's structural. So we think that Cognac category is still desirable. All surveys -- all independent surveys are showing that. Everybody say that, is that the time lag -- this time frame negative performance is lasting more than expected. Also you have to consider that we are not dealing direct with -- So there is a wholesaler trade off inside and cash pressure, high interest rates are playing a role in terms of arbitration of stock. We don't think that we can modelize a Cognac category for the next at minus 20 for the 5 -- next 5 years. So we don't see a huge shrink of the Cognac category. It is this momentum, which is quite complicated for us, even more than our peers. And how to turn it positive is that we need to be consistent on our pillars, switch from more brand powerless game that was the case some years ago to enter SKU by SKU, line by line, a bit more also analytic and commercially speaking, entering specific strategy as we have done for VSOP, 1738, XO, strategize that by cluster. And if you want even much more operational work than expected 2, 3 years ago to be able to reactivate the flows. We don't think that this switch is structured. And we think that continuing to remain strictly focused on our pillars on a strategic footprint and improving that on some tactical activation without deviating from the strategy. Without making compromise in the long term, I think we will get rewarded. It is painful so far, I admit and it is very painful for us, for sure. In terms of Rémy strong balance sheet, nearly 2 years in a row of declining top line at the end, the declining EBITDA, will have an impact on the A ratio. But everything equal, so without considering any exceptional events that I don't know. So far, we don't see this A ratio at the end of the fiscal '24/'25 be up in a very significant way. We are still and we will still in the lower tiers comparison ratio compared to our peers. So it's very solid. In this context, clearly, Board of Director will challenge ourselves, me, Éric Vallat, to what we can do with this available money that we have. You remember that also we increased the maturity of the strategic liabilities 1 year ago. It is a share buyback. It is a specific acquisition. It is an increase of the CapEx capacity to be able to even more be prepared to moment of the rebound because rebound technically will be very strong when it will happen in the U.S. also mechanically. So it will be a mix of that. But the important point to highlight, no panic. A ratio is and will be under control, even considering the worst hypothesis for '24/'25.

We will move to the next questions from Trevor Stirling from Bernstein.

Two questions, please. The first one, maybe just a little bit more color on the tariffs, Luca. It was phrased in the response as a deposit. Are you treating the tariff as a cost and so hitting the P&L or something that is a cash impact only? And second question around the U.S. and the snapback and when it might come and it's clearly low visibility. But I just wanted to check one thing, which is your Americas depletion level, which you think is basically flat versus 2019 with shipments down 25%, so that's the scale of the opportunity, is that 25% gap in the Americas? Is that right way to interpret things?

Thank you for the questions. So thank you for the first question. So because I think need to be clarified, China tariffs has been confirmed and started from 11 October, every time through an intercompany transition you send some goods in -- to China, and you pass the border in terms of -- impact, you need to cash advance. And bank grants are not -- we ask for that, but they don't want bank grant. They need to pay. So the impact, it is initially cash. It's credit to bank accounting. And the P&L is it when this bottle that now is supposed to support, to be -- being it by 38.1% of additional tariff increase if they will be confirmed, will be recognized in P&L only when this bottle will be sold from our entity, Rémy Cointreau China, to a customer, can be a wholesaler, can be through the boutique, final consumer. So there is a bit correlation. And every company also clearly, has an intercompany stock already there to be able to support the flows of the demand in next coming months. That's the main reason why in terms of impact this year in P&L for us is marginal. At the same time, also, if it is not the same saving in cash for ourselves, it is not so big at the same time for the '24/'25. On that point, the worsening market condition, the fact that our guidance for China has switched in terms of China from flat plus to double-digit decrease for the year means that you need to sell less volumes. So there is a mathematic saving for the wrong reason on this topic. So in average, and I want to give you more color in terms of months of difference between cash and P&L, every company has owned, but there is a delay between the impact on cash negative one and impact on P&L with some complications in term of county because we had to understand if you follow bottle by bottle, cluster by cluster, it is quite a mess. So thanks for your question because it is a technical important point. In terms of U.S., mathematically speaking, you are quite right, but the mechanics of the rebound is influenced by the fact that VSOP was playing a key role, and now it's playing less of a role in terms of -- and in terms of footprint of the future depletion, this is taken into account. But on the first -- second quarter that will be appear, the impact of stocking can be even higher than 25%. So mathematically speaking, you are right, it will not mean go in this direct way because the dynamics of the SKUs representing the core of the pyramid of the future sale, are very different compared to 5 years ago.

We will take our next questions from Simon Hales from Citi.

Can I just sort of follow up on the China Cognac sort of tariff debate a little bit, please? Could you just provide a little bit more clarity as to the scale of the headwind that you think your business would be facing on a 12-month pro forma basis? I appreciate there's a difference between the impact on cash and the P&L timing. But on a rolling 12-month basis, how should we think about the overall headwind that you're facing? I imagine it's a little bit over EUR 100 million. And then just to clarify on that as we head into fiscal '25/'26, I think you said in your remarks and in the statement that you do expect the business to return back to high single-digit organic sales growth next year with some improvements in profitability. Are you fully taking into account, therefore, the impact of both China tariffs in that guidance for the next fiscal year? And what actions would you be taking to mitigate the headwinds on the ground?

Thanks for your easy question. So I would not -- it will not shoot a number. I wouldn't -- don't give a number because everything is clearly ongoing. It's been confirmed, but it is not yet definitive. It's not annuity may attack that that will be applied at 100%. We continue to think that it is not -- it's incorrect. We think that we are not dumping. So the thing that we can say is that for us, clearly, China is more important than for our peers. So the impact is more important, more severe for us than for Martell or NSC or other operator touched by this measure. So we are already prepared to mitigate, I repeat, mitigate the impact of this measure. It will be confirmed in terms of survey studies to understand what is the elasticity on volumes linked to the price increase that, for sure, we will be obliged to pass through. At what time, what extent, what SKUs, I will not comment on that. This is part of our strategic engine to try to navigate in this very complicated timing. Prices will not be the only thing. So will be -- analyze all the other elements of our assets in China and all over the world to mitigate that. So starting from the manufacturing, operational side, including A&P and cost base. But once again, with the strong will of the group, that is not yet something that's written in stones forever. So we'll not do some stupid and very strong reorganization at a worldwide level to compensate that. So it would be a combination measure to mitigate the impact of the China tariff fit is confirmed, considering also the delay between cash and P&L impact as said. I will not shoot the figure, I repeat. It's more important than for our peers. That's the reason why it's even more serious for ourselves. So that's your second question. Let me -- it clearly call me for a clarification. I thought I've been cleared in the last part of my prepared speech by the -- probably not. Today, it is H1 sales, not full year or half year result. And we adjusted the guidance for '24/'25. This is not the '25/'26 guidance. We confirm, at the same time, that the trajectory of 10-year, '29/'30 is still confirmed, is more than possible because what we advance, because the effect that will be witnessed in our assumption when the restock in the U.S. will be there. And as we said, starting from '25/'26, you will see the first tool of the engine of our profit of growth, which is the top line will be back to high single digit. And bottom line, if you read the sentence, is the gradual improvement along the year. Doesn't mean that we do not grant a perfect symmetry into '25/'26 within top line and bottom line. What we grant is that recover to profitability, all along the remaining 5 years of the plan and starting from '25/'26, a top line growing according to the normative ratio of the engine, which is high single digit. No grant of symmetry between top line and bottom line. We'll be more precise, clearly, when '25/'26 guide will be shot. So 6 months, 9 months, but don't take it for granted in terms of the symmetry. That's not what we are writing there. There is a difference -- implicit difference between gradual and a statement in terms of top line.