Italian spirits group Campari warned that its ability to expand gross margin this year would likely be impacted by 'some temporary headwinds' after its first-half adjusted operating profit rose 2.1% organically.
Adjusted operating profit at the maker of Aperol and Campari bitters rose to €360 million ($390 million) in the first six months of this year, broadly in line with analysts' expectations.
Shares in Campari extended losses after the results and were down 6.8% at 09:55 GMT, with traders citing worries about margins and a cautious outlook as reasons for the decline.
A Gloomy Sector
Campari's results are in tune with a gloomy sector. Diageo shares fell more than 8% on Tuesday as the world's top spirits producer narrowly missed its annual profit forecast and warned that challenges could persist in the coming year.
Campari's new chief executive Matteo Fantacchiotti said in a statement that the gross margin is expected to be hit by factors such as poor weather, which affects high-margin aperitifs, and agave supply contract renewals, "guiding both unfavourable sales mix and shifting some of the related expected cost of goods sold (COGS) benefits into next year".
He added that he remained confident of being able to deliver "consistent operating margin expansion" in the medium-term.
Performance Highlights
First-half organic revenues rose 3.8% to €1.52 billion, with an acceleration in the second quarter.
In the EMEA region, Campari reported sales growth of 3.3% in the first half, with Italy reporting a decline of 5.2% due to pressure on high-margin aperitifs from very poor weather as well as impact of a high comparison base in the corresponding period of the previous year.
In Germany sales grew by 13.4% in the first half, driven by the performance of Aperol, Sarti Rosa as well as Ouzo 12 in the second quarter.
Sales in the Americas were up by 6.8% in the first half, driven by continuing double digit growth from Espolòn as well as growth in Aperol and Grand Marnier.
The company reported a sales decline of 10.7% in the Asia Pacific region, with Australia witnessing an 11.2% decline due to challenging macro and competitive environment.
News by Reuters, additional reporting by ESM.
