Alcohol nosedives: Campari down after accounts, Diageo down in London

(Il Sole 24 Ore Radiocor) - European markets do not like spirits, at least after the financial results of two industry giants: Campari in Milan and Diageo in London.

For Davide Campari, the attempted rebound lasted only a few minutes. Down sharply from the opening, the share briefly wiped out losses only to slip almost seven percentage points, at the tail end of the Ftse Mib. Sales for the first six months rose to EUR 1.52 billion (+3.8%), but the group explained that gross margin (EBITDA) growth will be impacted bysome unfavourable conditions. In Italy specifically, sales contracted 5.2% with pressure on high margin aperitifs due to very adverse weather, as well as the impact of a high comparison base. Group net profit was EUR 219.7 million, up 1.3%.

"The sector is currently experiencing a softening of market dynamics with increased competitive pressure on prices in key markets, while the macroeconomic situation remains volatile," explains Campari's Matteo Fantacchiotti ceo, according to whom, gross margin expansion is affected by "some temporarily unfavourable conditions, such as adverse weather impacting high-margin aperitifs and the effect of the renewal of agave contracts". For the medium term, the company remains 'confident' about its ability to 'maintain positive brand momentum and profitable growth with steady operating margin expansion'.

Diageo was hit by selling on the London Stock Exchange after reporting disappointing preliminary results for the 2024 financial year. The share price of the British spirits giant, which produces Johnnie Walker whisky, Guinness beer and Smirnoff vodka, among others, fell 8.5 per cent to last place in the Ftse 100 index. In the year ended 30 June, Diageo posted a 1.4% drop in sales to USD 20.3 billion. The performance was below expectations especially in the usually highly profitable Latin America-Caribbean region (-21%). Net sales also declined in North America (-3%). Operating profit increased 8% on a reported basis to USD 6 billion, but was down 5% on an organic basis. Attributable net income fell 13% to $3.87 billion. The dividend recommended by the board is 103.48 cents, up 5%.

"2024 has been a challenging year for both the industry and Diageo due to continued macroeconomic and geopolitical volatility. We have focused on the necessary initiatives to ensure that Diageo is well positioned when the consumer environment improves," said CEO Debra Crew, who remains confident. As for the outlook for 2025, on the other hand, Diageo indicates that 'the consumer environment continues to be challenging', thus expecting the negative pressure on operating profit margin seen in the second half of 2024 to persist. The company points out that it is focused on 'returning to the medium-term forecast range', i.e. organic net sales growth of between 5% and 7%. Analysts at Jp Morgan confirmed their neutral opinion on the stock, with a price target of 3,200 pence.