Campari warns of impact of bad weather, agave contracts on margin
Adds CEO comments, updates shares
By Elisa Anzolin and Elvira Pollina
MILAN, July 30 (Reuters) -Italian spirits group Campari CPRI.MI warned that its ability to grow itsgross margin this year would likely be impacted by "some temporary headwinds" after its first-half adjusted operating profit rose 2.1% organically.
Shares in Campari fell as much as 8% after the results and were down 2.5% in late afternoon, with traders citing worries about margins and a cautious outlook as reasons for the decline.
"At the moment we have an outlook more for a flat margin (for 2024), not negative, as we have lost a chunk of opportunity to improve our mix in two important months of the year," newly appointed Chief Executive Matteo Fantacchiotti told Reuters, referring to May and June.
Campari said its gross margin has been hit by factors such as poor weather in parts of Europe, which weighed on high-margin aperitifs, and a delay in agave supply contract renewals, "guiding both unfavorable sales mix and shifting some of the related expected cost of goods sold benefits into next year."
Agave is used in making spirits such as tequila.
First-half organic revenues at the maker of Aperol and Campari bittersrose 3.8% to 1.52 billion euros ($1.64 billion), with an acceleration seen in the second quarter.
The group reported sales solid growth in the United States, which is its single biggest market, but revenues in Italy, France and Britain were hit by bad weather, Campari said.
Adjusted operating profit rose to 360 million euros in the period, broadly in line with analysts' expectations.
Shares in Diageo DGE.L also fell on Tuesday, as the world's top spirit maker narrowly missed its annual profit forecast and warned that challenges could persist in the coming year, offering a gloomy backdropfor the sector.
"We think market reaction [on our stock] was amplified by read across from competitors," said Fantacchiotti, adding he was satisfied with the company's sales and revenue positive trends.
Fantacchiotti reiterated the company remains keen on M&A opportunities after completing the buyout of French cognac house Courvoisier.
"We are continuing looking into potential deals which can increase our strength in Asia and in the Americas," he said, adding the focus was on premium products.
($1 = 0.9233 euros)
($1 = 0.9256 euros)
Reporting by Elisa Anzolin, additional reporting by Andrea Mandala and Elvira Pollina
Editing by Keith Weir
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