Good afternoon. This is a Chorus Call conference operator. Welcome, and thank you for joining the Campari Group Second Half 2020 Financial Results Presentation. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.
Should anyone need assistance during the conference call, they may signal an operator by pressing star and 0 on their telephone. At this time, I would like to turn the conference over to Mr. Bob Quincy Contreras, CEO of the Campari Group. Please go ahead, sir.
Thank you very much. Good afternoon, everyone, and welcome to our first half twenty twenty call. If you follow me on page number 4 of our presentation, I'll kick off with the highlights. Overall, as expected, our strong brand momentum was affected by a market specific channel SKU as well as destocking and this particularly in Q2. Looking at net sales, the full effect of the pandemic, as well as the subsequent restrictive measures across all our key markets, were as expected registered during the Q2 period, leading to a 15.9% decline, with after the initial effects in Q1, you'll remember, we were down by 5.3%, which leads to an overall average of 11.3% decline.
Clearly a tough comp base. You remember, we grew by 8% in the first half of last year also impacted, that delta. Measures to combat the virus have had a great impact, obviously, on the on premise skewed markets, which were partly mitigated by quite resilient growth in the off premise food market, although I must say that shipments were below sellout trends in those markets as well. Looking at it on a geographic basis, we've had strong declines in semia, and this is mostly to 2 very on premise skewed markets. Italy and Spain as well as global travel retail, which was, impacted.
Latin America was also impacted. And the two put together were partly offset by quite positive, trends in core off premise markets. Particularly Germany, the UK, Russia, Canada, and Australia. However, the U. S.
Declined largely due to destocking effects at the wholesaler leveraging key brands as well as the tough comp base. You remember that in the first half of last year, we grew by 10.9% in the U. S. Looking at it by brand, we have overall strong brand momentum, which was affected by the channel SKU and destocking. Our global priorities declined by 9.9% with, unfortunately, the Aperitifs after all the Campari down low double digit.
Largely due to the on premise focused Italian market, which felt the full impact of the restrictive measures during the Q2 period as the, I mean, the Italian on premise was shut down for, 10 weeks out of the 12 weeks of the quarter. Meanwhile, while Turkey, Grandani and Sky also declined largely due to destocking in the key U. S. Market. The Jamaican rums on the other hand were quite resilient.
Regional priorities were down 11.5% with declines across the whole brand cluster with the exception of Espolon in Forti Creek. Our local priorities were down 13.1% overall due to double digit declines in the single serve IP ITs in Italy, which offset quite resilient performance across the rest of the portfolio. On a reported basis, net sales were down 9.4%, reflecting a positive perimeter effect of two point 1% as well as a slightly negative Rx effect of minus 0.2%. Moving on to adjusted EBIT on an organic basis, declined by 30.8 percent, which is a amounts to a 470 basis points margin dilution. Clearly against a tough comp base, but largely due to COVID-nineteen impact.
Hitting in particular our high margin and on premise acute Aperitif business. Our cost containment initiatives in Q2 across both A And P And SG And A helped to mitigate the dilution which was still heavily impacted by top line decline and lower absorption of fixed costs. On a reported basis, EBIT declined by 27.7 percent with a positive forex effect of 1,000,000 and a negative perimeter effect of 1,000,000. Net profit on an adjusted basis, came in at 77,600,000, down 33.5%. And on a reported basis to 73,000,000,000, down 40.6%.
Net debt in the period reached 1,000,000,001,000,000, versus the 777, which we had at end of the year, so up by 1,000,000. Clearly, this is due to the pre acquisitions we did in the period. As well as the increased dividend payment and share buybacks as well. This all of it put together led to net debt to EBITDA and address ratio basis of 2.4 times. Moving on to Chart number 6, I think it's just graphically important to see the impact of Simeon and Italy on, from a regional and geographic standpoint, whereas you can see that you know, from a brand basis, the performance hasn't been so divergent across the different clusters.
And importantly, our global priorities continue to outperform the rest of the, of the portfolio. What is more, I think, interesting to look at is our strong brand momentum, across the off trade in the U. S. During the lockdown. And you can see that perfectly portrayed on chart number 7, where you see on a weekly basis, our performance in the Nielsen terms, versus the market and on average see that throughout the period from week 11 all the way to week, 28, we've, strongly outperformed the market on average by growing 50% than the market.
Below, you see the performance by brand. It's also important to underline that the same level of outperformance in the off premise occurred also in key European markets. If we look at the lockdown volume percentage gains on Aperol and Campari in Italy, Austria, Germany and the UK, you see that On the one hand, we continue to, perform at a double digit pace in all of the markets the growth rate would have been versus the market even bigger because clearly we make a large part of the category. So we've outperformed the market even more significantly. And on average, our Campari subsidiaries also grew 50% faster than their market reference.
Across all key markets. Moving on to Chart number 10, just to illustrate the fact with the strong decline in Italy, the Italian business only accounted for 59.9% of the our stairs in the first half, which on the other hand allowed the U. S. To grow to 32.1%. Once we're talking about the US.
Let's move on to the Americas on page number 11. Overall, an organic decline of 7.6%. Having said that, looking at it by a different market, we see the US down by 4.1%. This overall decline is due both to a very tough comp base. We were up 10.9% last year, as well as the negative impact from COVID-nineteen on on premise restrict and this was particularly amplified in Q2.
Some key brands such as Espolon, Rayne Nephew, Athoro and Campari continued to grow, this was unable to offset declines in SKYY or Marnier in Wild Turkey, which suffered from a destocking effect at the wholesaler level. Brand momentum in the off premise remains very strong across our portfolio as we've seen and consistently above the market average. Clearly, destocking at wholesaler level impacted shipments, which are lagging behind more positive dictations, which are on a high single digit on a total company basis and even stronger sellout trends. Jamaica was down 8.9% and overall declined due to the closures of the on premise as well as reduced touristic flows as Jamaica is quite a tourist destination. And this was also amplified, as in the case of the U.
S. By tough comp base, where we grew very strong double digit last year by 18.6%. Canada, which is a prevalently a off premise market, had a very strong first half, up 9.6%, very positive results, across the portfolio of brands. Brazil was down by 8.5% this is an on premise skewed market. And here, we also have a little bit of a mix issue in that, the, more premium brands and higher profitability brands, Campari and Sky suffered, whereas, they, more value based and lower profitability, local brands, he did well.
The rest of the region was down 34%, Mexico, was heavily impacted by, and alcohol sales down by 48.3%. And Argentina did, I think, decently given the circumstances of both the economic situation as well as the pandemic down 22.1%. Moving on to Southern New York, Middle Eastern Africa, we see where we've taken the brunt of the hit. Overall, this region is down 32.8% with its large component, Italy, down 43.1 percent on an organic basis. There was a strong decline, driven by the full on premise closure, recall that 70% of our consumption in Italy happens in the on premise.
And this was clearly a reaction to the pandemic. And there were also limitations, particularly in the first half of the quarter on customer traffic in the off premise. The whole Aperitifs portfolio declined and unfortunately, this occurred in a peak seasonal quarter, which was also amplified by a reduced tourism traffic. The on premise recovery from late June started gradually as consumers began to return to bars with outdoor spaces, but clearly, it's not a return to, the normal. The rest of the region was down 32% France was flattish with a positive Q2.
Q2 was up double digit. We had the on paper destocking effect due to the route to market change as we acquired our distributor. Spain on the other hand had a real decline, down 49.3% clearly impact impacted by its on premise queue as well as reduced tourism. Looking at Africa and Nigeria continued to grow. Many thanks Campari Wild Turkey in American, Honeywell, Spirit, South Africa is strongly impacted, growth by the closure of, alcohol sending off this as well as, the amplification brought about, but I route to market changes.
Mobile travel retail comes as no surprise, down by 60.7% as there was very good shopper traffic. And we don't expect a major recovery on this part of the business at least in the short term. Moving on to 2 Chartlyn, North Central Eastern Europe had a very solid first half of the year, up overall 5.9%. Germany was up 3.4%, a resilient growth with a nice acceleration in Q2 as, and this is prevalently in off premise market. Where we have positive sellout trends continuing to outpace shipments in a key market for the group.
Growth in our Aperitifs brands was strong. Aperol up 9.8% compared to 4.7% and that's particularly positive given the big price repositioning we did last year. However, it's a record from the chart. I showed at the beginning that the sellout trends are actually much, much stronger double digit trends. We've also seen modest growth in Ouzo 12, when Grant and Bulldog, helped to offset declines in agency brands as well as the on premise due to the cars, Italian Beters, and, Frangelico and partnering.
The UK continues to go from strength to strength, up a very strong 46.2%, robust growth continued into Q2. Driven mostly by Aperol, Rainneck, overproof, Magnum Tonic, as well as Campari. We have very strong growth in the off premise, And I must say an unparalleled growth, free digit in e commerce channel, which really contributed to the overall performance. Russia, very positive, up 19.2%. Strong growth, despite the tough comp pace, we were up 10.9% last year.
Again, this is a largely off premise, market. The key drivers here have been Mondoro Aperol and Shenzanover Move. On a smaller base though as spot on Wild Turkey and Campari continued to grow nicely. The rest of the region was down 3.2% we've had resilient growth in Austria and Switzerland, particularly behind our Aperitifs. Belgium was flattish but we saw some small declines in Eastern Europe and Scandinavian markets.
To round up our geographies, Asia Pac also had quite good first half, up 7.1%. Australia on a full semester basis was 18.7%. This following a weak start to the year, you remember the chance that were impacted by bush fires we have, an overall great performance across the, the portfolio, while Turkey RTD, which I'll is very important there, Campari and Espolon also grew double digit. The rest of the region was down 19.2%. And with divergent, performances.
China, which is predominantly on premise, actually registered double digit growth as it recovered 33 post COVID pandemic. In Q2, for instance, we were up 60.4%. On the other hand, Japan declined 48.6 percent and this mostly due to the continued destocking, which occurred ahead of our route to market change, which is occurring as 16, aperol impacted by Italy, Samya, down 11.6% on the half. If we exclude Italy and GTR, we have been up by 4%. We have strong off premise and online sales in all of our core markets.
And feel very good about the prospects of the brand going forward. Campari similarly reflects the same performance performances to Aperol down 10.6%. Again, it's the largest market Italy, which impacted due to the closures in the peak period in Q2. On the other hand, strong growth and nice for the mix with the U. S.
Up double digit Germany up mid single digit. Grand Anier was down overall 9.7%. Again, here, different performances, very proud performance in Canada, up 13.6%, but this was unable to offset weak shipments in the U. S. Market.
As you know, Carmani is a fifty-fifty split between the two channels. So despite very positive our premise sellout trend, we were not able to recover, what we lost in the on premise as well as were impacted by destocking at the wholesaler level. Moving on to the following page in our bourbon portfolio, down 7.7% building momentum in Q2. Clearly, this overall negative performance needs to be seen also against a tough comp base. We were up 11.4% last year.
And it's largely due to destocking in the U. S. Where actually in the case of Wild Turkey, we were the ones pushing the destocking in Q1 as we were preparing the brand the relaunch of 101 behind new packaging, which then we had postponed due to disruptions from COVID. Sales in Q2 progressively more positive and very strong growth in the 2nd largest market, Australia. American Annie, on the other hand, registered a decline overall, and this is mostly due to destocking in the core U.
S. Market, which more than offset positive results in Australia and Nigeria. Sky, overall, was down 16.5% decline in the core US market, But this mostly due to destocking at the wholesaler level in Q2, where the brand was down 20%. We have a very nice performance in terms of sellout on core Vodka, which is growing in the high single digits and roughly in line with the Vodka market. So that's quite positive.
Nice growth in China, but this was unable to offset the declines across the other international markets. Our, run portfolio is positive, up mid single digits, 4.9% with the site acceleration in Q2. Key driver here is, Rayna, if you overproof, doing very nicely in its 3 core markets. The negative performance was driven by Appleton Estate, and this is mostly due to the destocking which happened across all of our markets, ahead of packet and change in Q1. Clearly on premise closures and particularly in Jamaica and Health Fighter.
Moving on to our regional brands. Espolon up 3.3% big difference between shipments and, positive depletions as well as higher sellout trends. Our depletions were up 47% in the period in the U. S. And our sellout trends were even stronger.
We're also continuing to see encouraging sign in seeding markets such as Russia, Canada and Australia. Bulldog on the other hand was impacted by its large presence in on premise markets such as Spain, as well as GTR. And for improving consumption trends in Germany, the UK and Belgium weren't strong enough to offset the declines elsewhere. Glenn Grant was also impacted by GTR and Italy down 42.1% plus 40 Creek, which has the bulk of its sales in Canada benefited from the strong growth across our portfolio in that market, up 13.8%. The Italian bidders were down unfortunately 23.5% Again, they're quite skewed towards the on premise and also have a large share of their sales in the core Italian market.
Cinzano, to remove the time by 16%. On the positive side, the core Russian Australia are doing quite nicely. They weren't able to compensate for declines in GTR, Argentina and the rest of European markets. However, you'll recall, we will position the brand towards the end of last year behind a subsequent price re alignment. So that will take a while to iron itself out of the market.
Sparkling lines were down 18.7%. Clearly, there aren't many celebratory moments during the pandemic. So anything with bubbles suffering. On the other hand, though, Mondoro and Sedona were flattish, particularly thanks to a very strong performance of Mondoro in Russia up 19.1%. To close it up with our local priority brands, we see that, unfortunately, this cluster was impacted by the negative performance of the mono use Italian Aflacitifs, Campari Soda and Crodino, which were down under 30% range.
30.5% on soda and 34.7% on Crodino, which is a little bit of shame because the rest of the portfolio did quite nice the most importantly, the quite profitable RTD business in Australia was up 23.5%. Lesser profitable local brands in in Brazil were up 22.4% and our 2, local heroes So 12 in Germany and Cabo Wawa in the U. S also did quite nicely. This is it from a net sales perspective. So I'll pass on to Paulo will dissect the financials.
Thank you, Bob. If you follow me to Page 23, we have the analysis of the Americas region performance in the first half of twenty twenty. As you can see, the EBIT came in at 1000000 versus 1000000 of last year, showing a reported an overall reported change of a negative 9.3% and 50 basis points EBIT margin dilution. Looking at the organic performance, the EBIT adjusted organic decline, account for 19.3 percent in value with, 250 basis point dilutions. At the level of gross profit, the region, suffer from a declining value of 14.5 percent, stronger than top line, which were down 7.6%.
And it's all leading to a decline of 4.40 basis point, in terms of, our margin. Three factors here to to highlight, 1st and foremost, the unfavorable sales mix by both brands namely, you know, high margin robot, but I already suffering in in the US and, and China with, you know, skewed from entry to, to the off trade channel. Secondly, we, we call out the negative agave purchase price impact. And thirdly, the lower absorption of fixed production costs given the top line decline of 7.6 percent organically in the region. A and P has been contained by 27 point sent in value, more than top line driving a 120 basis point margin accretion.
Key drivers were, you know, cost mitigation initiatives as well as, you know, different phasing of of investments from Q2 into, Q3. And thirdly, a shift from offline to online investments. SG and A showed a moderate increase in value by 3.6%. Still driving 230 basis point margin dilution due to the lower absorption, again, of structural cost given top line decline. And that was partly mitigated by the streamlining of some local structures, particularly in, in South America.
The combined effect of FX and perimeter generated 100 basis point margin accretion. If we move on to to the CMEA region EBITDA came in, with a negative 1,800,000 euros versus a positive €49,000,000 of prior year, showing on a reported basis, a decline of 100, uh,103.6 percent in value and 21% as a percentage of, of sales. Looking at the organic performance, The strong EBIT adjusted organic decline was heavily hit by COVID, in particularly the high margin at the predictive deals in Italy, the GTR channel in Spain were, you know, the most, affected. Gross profit in value declined by 35.2 percent, actually higher than the top line decline of 30 0.8%, driving 240 basis point margin dilution. And again, even in this region, we have the This is the very same, performance driver with unfavorable sales mix, driven by on premise closure, particularly in the Mediterranean markets in Italy and in Spain, hitting the high margin operative business.
The A and P investments have been contained in value by 14.14.9%. But you know, less than top line resulting in 420 basis point margin dilution, due to the combined effect of containment and shift from on prem to, online brand building investments behind particularly the Aperity portfolio. To fuel the, the consumption momentum. The SG and A has been contained by 3.9% in value. But remained highly dilutive, as you can see, 13.8% the dilution impact as a consequence of a lower assumption of fixed pressure cost, given the strong double digit top line decline.
The dilution of, our marginality was partly mitigated by cost containment actions, reducing variable starch cost, including the usual suspects, traveling ban, hiring freeze and on and so forth. The combined effect of FX and perimeter accounted for 70 basis point dilution, totally driven by the first time consolidation of the French distributor, which we've recently acquired, which was negatively impacted by one of the stocking, as well as EBITDA 19 impact. If you move on to page 25, Northern And Center, Eastern Region, analysis of of performance. EBIT came in at 57,400,000 versus 49,000,000 of, of last year, showing reported positive, reported change of 16.9% and 3 70 point EBITDA margin expansion. Looking at the organic performance, even here, the performance is quite quite strong.
EBIT adjusted organic growth accounted for 16.8 percent in value, well ahead of top line leading to 310 basis point patient. Gross profit actually grew in value by 2.9% slightly lower than top line, which was up at 5.9%. Generating 180 basis point dilution, again, driven by a favorable geographic sales mix where, you know, the outperformance of Russia drove some, some, some dilution in, in, in the Northern And Central European, P and L accounts. E and P decreased in value by 13 point 4% leading to 330 basis point accretion. Again, also in this region, worthwhile mentioning cost containment initiatives different phasing of, of, AP Investments, and, and on and so forth.
SG and A decreased in value by 3.7 percent, generating 160 basis point accretion reflecting the cost containment measures that were implemented in Northern Europe. The combined effect of effect perimeter on marginality accounted for an accretive effect of 60 basis points, primarily driven by the termination of low margin contracts in Europe. If you move on to APAC page 26, Overall, EBIT on a reported basis came in at 1,000,000 versus 1,000,000 of prior year. With a reported change, decline of 4.8 percent in value and 80 basis points margin dilution. Looking at the organic performance, EBIT adjusted organic growth accounted for a positive 6.3%.
Slightly below top line performance of 7.1 percent, leading to 10 basis point dilution. Gross profit in APAC was up 8.6 in value, what I had, of the top line, leading to 60 basis point accretion with a positive, sales mix, by brand and, and, and markets within the region. A and P was slightly down in value negative 0.7 percent, driving 90 basis point margin accretion, again, mid and phasing of marketing initiatives, played a key role. The SG and A were up in value. Double digit, actually 14.3 percent, leading 160 basis point dilution due to the tail end effect of the relocation of the regional head office from Australia to Singapore.
The aggregate, the combined effect of FX in perimeter in APAC accounted for a negative, impact of 70 basis points. Driven by, totally driven by FX. If we move on to deconsolidated P and L, Page 9. As you can see, up there, overall, in the first half of twenty twenty, BP declines 180,000,000 to 130,000,000. So it was overall down by 50,000,000.
Well, an organic decline of EBITDA adjusted of 27, 30.8 percent, you know, in value. With a 470 basis point margin dilution, 1,000,000 in value. 3 drivers, just summarize, we had a tough comp base for the first half of last year. EBIT was up to 10.6% in value. And that clearly played, you know, a key role in, in driving this double digit negative performance.
Then of course COVID hitting, in particular, our high margin operative business in its peak period. And then a lower absorption of fee structure cost given the top line decline. Forex and perimeter combined effect accounted for 3.1% in value with 40 basis point margin accretion, actually perimeter effect was negative maybe due to this proportional effect of the first time consolidation of the RSA, which was, as I said before, impacted, negative and impacted by the 1 of the stocking ahead of, the acquisition of, of the distributor as well as COVID 19. If we move on to page 30, the gross profit on a recorded basis was down in value 13.9% with a 3 10 basis point dilution to 58.9% Organically gross profit was down 16.3 percent in value, driving a standard 50 basis point margin dilution. I would not reiterate the, the drivers, which I've already mentioned, A and P on a reported basis was down in percent, with, 200 basis point, accretion effect on EBIT.
Organically, the A and P, was down by 20.2 percent in value, driving 180 basis point margin accretions and cost containment measures, postponement of signed initiatives in the on premise and GTR channels to the back end of the year. And that enabled us to sustain investments into digital brand building and online brand activation as well as e commerce initiatives. The SG and A on a reported basis were down 3.5% in value with a 220 basis point margin dilution. Organically, SG And A were flat in value, driving 300 basis point margin dilution, mainly due to lower absorption of fixed cost, actually worthwhile calling out the that the combined effect at group level of cost containment measures starting in the second quarter led to 7.5 organic decline of SG And A in the quarter, if seen in, in in isolation on a on a stand alone basis. If you move on to page 31, operating adjustments of 27.4, negative 27,400,000.
Where primarily related to the, impairment, on of the Bulldog trademark for €16,300,000, which the level of the overall P and L has been compensated. As you can see, underneath, by, you know, the the the write off of the, of, you know, vast majority of the earnout liabilities for 15, amount, sorry, for you you earn out for €16,800,000. Nice financial charges, came in at €19,200,000 in in first with negative exchange rate differences, and effects on the current valuation of financial assets generating a a negative impact of the €3,900,000. We actually, call out an increase of the average cost of net debt to 3.9% mainly due to the negative carry, on the recent round of, of, of refinancing. Actually, in, in, in 12020.
The net the average net financial position, accounted for a a €908,000,000 versus 892 of of last year. And that was, you know, the second driver of the overall increase of the net financial charges that I've already given, you know, my comments on, on the, on the, production and earn out write down. Profit before taxes came in at 1,000,000, down in value by 64.3%. If you move on to page 32, group net profit, Ajam, said, came in at 77,600,000, down in value by 33.5% in the first half of this year. With the recurring effective tax rate, which stood at 29.7 percent, slightly up from 28.1 percent of last year.
With a a recurring cash tax rate at 23.6 percent. And, again, it's slightly up compared to last year. On, when it accounted for 23.2 percent. The group profit came in at €73,000,000, down 40.6 percent versus the H1 of the of last year. The cash flow, page 34, free cash flow was, was actually negative in the first half, and €4,500,000, down, from €85,700,000 of of last year.
But, you know, if you look at the recurring free cash flow, it came in at €65,000,000, down just €21,000,000 versus 1st half of last year. Key drivers of the, reduction in, in recurring free cash flow is the, of course, the decrease in in EBITDA adjusted. Which accounted for a a €45,400,000. Taxes paid, you know, had a negative impact as we, paid the taxes on the capital gain relating to the sale of this asset accounting for 1,000,000. In in the first half of actually in the second quarter of this year.
And then we had a lower increase in operating working capital in the first half. €55,000,000 this year versus €77,000,000 of of last year. CapEx came in at €26,900,000, of which maintenance CapEx accounted for 1,000,000. If we move on to Page 35, we have the analysis of operating working capital. It came in at 7744,000,000 versus 694.
Of last year up on a reported basis by 50 basis, 1,000,000. Looking at the organic increase of operating working capital, it accounted for a €55,400,000 due, you know, primarily to the increase in inventory, which accounted for 1,000,000, of which hedging liquid increase accounted for 1,000,000 mainly due to the business seasonality and the stock increase that we have laid down in anticipation of the gradual reopening of the trade activities in Q3. 3. The decrease in payable and the decrease in receivables had basically generated a bay basically a wash. The the negative Forex impact accounted for €35,000,000 and the perimeter relating to the acquisition of our Frank's distributor and the, Champagne accounted for €29,800,000.
Operating working capital as a percentage of net sales came in at 42.2 percent or, you know, 40.5 percent are taking into account the 12 month sales effect of the acquired businesses. Basically brought in line with H1 of last year. Moving on to page 36, we have analysis of net, group indebtedness. Net debt came in at 1,000,000. Up at €184,000,000, versus, December of the last year.
Mainly driven by the acquisition of RFDA, which accounted for roughly €55,000,000, the acquisition of RBA. Which accounted for about €44,000,000, as well as the investment in Doneico, which accounted for a €44,000,000. Dividend payment accounted for €62,000,000 and, through June end, the share buyback program accounted for roughly. 96,000,000, totaling an overall cash, cash outlay of, you know, not recurring outlay for 200 in €81,000,000. The the leverage ratio and debt to EBITDA, came in at 2.4 times, versus 1.6 times, as at December last year.
Page 37, the maturity As you can see, we have, you know, a gross debt that accounts for a €1,181,000,000. Of which, €600,000,000 are recognized as as long term, which the vast majority of it you know, expiring at the back end of the maturity curve. On the contrary, as you can see in the footnote, we have a Eurobond that is for accounting for €581,000,000 that is, starting in September of this year. And whose repayment is already clearly, covered by the existing excess cash. EUR 787,000,000.
And then of course, we can rely on, on clients in excess of 1,000,000,000 at the moment. I think, Bob, this is it on the numbers. I would then back to you for the update on marketing initiatives.
Thank you, Paulo. Well, I'm not going to go into detail on the marketing initiatives. I think you'll see these pretty pictures really highlight the fact that our sales and marketing folks have done a great job pivoting very, very quickly to a new business model, which the right one for the COVID period with a big focus on the off premise and on building, driving frequency of assumption of our key cocktails by moving into full digital from, offline to online We've done that very successfully across the portfolio. Where physically possible, also we continue to premiumize our portfolio by adding you know, premium line extensions or relaunching existing brands such as now I think more important are the corporate initiatives on page number 43. It's not only the marketing and sales folks who work very hard, but, we also had a very intense period on the corporate level.
Clearly, we were able to, complete the renovelment alleviation of the company into into Holland. The settlement of the withdrawn shares was done and the cash outflow was lower than what we expected. Today, though, it's important to underline that the Board of Directors resolved to an extraordinary shareholder in which is and called for September 18 2020 to grant shareholders holding special voting share fee, which joint with the underlying ordinary share grant 10 voting rights with their right to convert such shares into a special class, granting multiple votes each of which granting 20 voting rights, which will be called extraordinary shares. The rights convert strategy to further strengthen our pursuit group stability as well as foster good development and the continuous involvement of a stable base of long term shareholders. The acquisition of Champagne went through when integrating this little gem, which I think will give us a lot of satisfaction in the years ahead.
We've also completed our financial investment in Tonico, which will give us significant insights into e Commerce and help develop our skills in that area. I think what is new for the market is our announcement today of a restructuring program for the sugar business in Jamaica. We're launching this program to restructure the agricultural sugar business, losses we've accumulated over the years, which have been further penalized by the COVID-nineteen pandemic. Currently, a consultation process with local authorities as well as trade unions is, ongoing. And, we we aim to reach the best possible.
I'll come for the local community, hopefully soon. This will lead to a 1 off provision which will cover the expected restructuring costs. But these will be included in the group's results, at a further date as a result of the consultation process, which, as I said, is still ongoing. Looking forward, I think it's quite clear that we're quite confident for the long term momentum of our business. In the short term, we expect uncertainty to remain with regards to both the extent as well as the timing of the economic recovery, which, we all hope will happen in the context of a gradual lifting of the restrictive measures across different markets as well as under our government, economic impetus.
With most of our key markets being affected by COVID, our performance clearly has been strongly impacted in the 2nd quarter. Which unfortunately is a peak season for the high margin and highly on premises security business. On the other hand, strong brand, set up momentum in the off premise continued across key markets. But again, here, this performance wasn't fully reflected in shipments as we underwent destocking across numerous markets. Looking at the remainder of the to continue to affect in particular the beginning of third quarter.
The negative impact could lessen in the gradual lifting of the productivity measures across markets based on current visibility. Moreover, we expect shipments to progressively catch up, move to positive sell out trends once the destocking activities are completed at wholesaler level in certain markets actually at retailer level. On a reported basis, full year results are expected to be impacted also by an incremental one off costs for an overall an estimated amount of approximately 1,000,000. This is, in addition to the nonrecurring costs already registered than the first half and are mainly related to business reorganization initiatives as well as transaction fees and connections with the recent acquisition and the transfer of and contain the effects of the pandemic on the business in the short term, we will remain focused on pursuing our long term strategy. Clearly, we're long term focused and orientated.
We remain confident about the long term consumption trends and the growth opportunities for the group We will continue to leverage the strength and resilience of our brands business model as well as strategy, ensuring we're strongly positioned and ready to accelerate our growth as soon as consumers can resume their habits in the on premise. Talking about the on premise, as a committed and quite long term brand builder, we will remain focused and highly engaged in this key, channel opportunity, thanks to our distinctive brand portfolio. As we are firmly convinced that the out of home social experience and conviviality will remain essential to consumer's lifestyle and it will be important for us as we mainly use the on premise to recruit new consumers into our franchises. So this is it on our end and we're looking forward your questions.
Good afternoon. This is a voice call conference operator who will now begin the question and answer session. You. The first question comes from Mr. Simon Hales of Citi.
Please go ahead, sir.
Thank you. Good afternoon, Bob. Good afternoon, Paolo. Just a couple of questions, please. I mean, Bob, maybe just sort of some kicking off where you left off are just around stock levels, you know, across the group.
Now how how do you how do you feel stock levels are in the different regions? You mentioned maybe still a little bit of destocking going on into the third quarter. You know, where is that relative to where you think stocks are at the right levels? And as we look forward to shipments going back to matching depletions, is that what we should expect by the end of Q3 or the end of the second half or is there an opportunity to see some restocking, perhaps in some markets where inventory, and who's gotten a little bit low? That was the first question.
And then the second question was around some of the cost elements. How do we think about sort of, you know, the A and P line as we move to the 2nd half? You referenced the number of phasing perhaps issues around the relaunch around packaging of some brands. Now with that, we'd be shifting into Q2, into Q3, from an A and P perspective. And then more broadly around cost containment, you know, do we expect to see a continuation of the the Q2 levels of SG and A reduction continuing through the second half.
Thank you.
Okay. I'll take the first question in the first half of the second one, I'm going to leave the rest to Paolo. Honestly, I think that in this environment, wouldn't be realistic to, expect any restocking going forward. I think that, throughout the second half, whether it's going to be Q3 or in Q4, we would expect a realignment between shipments as well as a depletions or sellout figures, but we don't think that wholesale or key retailers are going to go and restart themselves. Now with regards to A and P facing, yes, to a certain extent, there's a re phasing into Q3.
But, having said that, we're also, we've frozen quite a bit of AMP. I mean, we're waiting to see how how trading goes. I mean, we need to understand, for instance, how how tourism goes. And whether we can revert to, to some, events, the way we used to do them in the past. Probably not.
But having said that, yes, there will be more A and P into Q3.
Yes. With regards to the phasing of the the MP spent and the cost containment measures, you know, as Bob has just said, clearly, you know, the third quarter of the year, is still a big season for aperitifs. So, you know, we try to get the best out of it when, you know, the the current circumstances, but, you know, with, the on trade, you know, parts of the open in, insulated markets, we're trying to exploit that opportunity window. So, you know, we're expecting A and P to to build that in the third quarter. Clearly, the fourth quarter of the year, we still have very limited visibility.
And we actually cannot say it will depend on consumption patterns, but also the evolution of pandemic, which we we don't know. So it's very difficult for us to to give, you know, a a guidance set for for the full year on on A and P. With regards to the to the second question that is, you know, the SG and A trying to, you know, again, with the with the relatively limited visibility, what we can say is that also, you know, in Q3. We're expecting to generate some, some efficiencies. Hopefully, you know, if, you know, the market, completely reopens, and things go to, it's, you know, normality.
We, we we should be in a position in Q4 of having a more regular trend in SG And A. So savings will be it in, in Q3 and, you know, following a positive trend in Q2 and to a lesser extent in Q4.
Got it. That's that's that's helpful. Can I just sort of come back on the on on the the the reply to the the stock level question? Where where Bobby still seeing destocking into the third quarter. Is it in all the markets you saw in Q2 or is it specific regions that are still seeing that the expecting ongoing?
Well, we're seeing it to a small extent continuing in Europe as we're performing our markets and we're not seeing the sellout numbers being reflected in the shipment. But it's probably will be more impacted by the U. S.
Got it. That's really helpful.
The next question comes from Edward Mundy of Jefferies. Please go ahead, sir.
Arlene, Bob Paolo. Two questions. For me. The first is in Italy. You talked about, some on premise recovery from late June, as consumer coming back to bars without without the space, you're not quite seeing your attention normal.
I think on on the one hand, the mobility data does look quite good, I think, for Italy. On the other hand, you know, tourism is quite slow. I was wondering if you'd able to provide a bit of an exit rate, as we got to the back end of June into July, quarterly or certainly some more color on the Italian market. The second question is on business priorities. As a category, I mean, you highlighted some pretty good performance in alcohol, ex Italy, and GTR, and includes a very good performance with Campari, in the US.
I think you mentioned it received some quite good frequency of consumption, but to what extent do you think you're getting more trial and you're creating more consumers into both as well and and Campari and and the broader physical therapy occasion. And then the third question, I apologize if this is covered in the opening remarks. It's really around the, ordinary term, not the ordinary. These are special ordinary C class shares, which try the 20 votes. My question is, a, so how many are there for when you call a lot, giving it some shareholder hold on to the shares for a long time.
But do do they do they need to continue to hold on to share for 10 years to get the 20 votes? So generally, we could just provide a bit more color around the the 20 vote element of the C Class.
Good afternoon. And You know, the on premise on Italy, we opened in the second half of June. I mean, when it first reopened, was very much to empty houses, gradually, those outlets which have, been able to really grow their outside space. Their doors have started doing well, but they're still social distancing measures. And we're seeing still more of a younger crowd going to the on premise than, the 30, 30 pluses.
Clearly, it is running below normal regimen. And I think the big question for us is what's going to happen this summer. Is the local tourism going to be able to compensate for the loss of international tourism and so far? I think, only time will tell there. Your questions on your on the activities with regards to frequency versus, trial, we we've been very, very good at, you know, remodeling, our marketing mix, and as well as our refocusing our sales forces.
But the data we get so far indicates that this is much more an increase in frequency as opposed to a growing trial we firmly believe that you need an on premise presence and activation to effectively, you know, get liquid on lips and people to try. Yes. That is happening selectively, but it's a far cry from what we were able to do and used to do before the pandemic. So with frequency, we're doing very nicely, but I think going forward, we will need trial to, maintain momentum. Grow the momentum because I think the brands have good momentum.
With the vote share, well, with the currency class, votes, those people who had already registered and had 2 years just needed 8 more years to get to the 10 years. To qualify for the enhanced, the, voting mechanism of 20.
Thank you.
The next question is from Trevor Sterling of Bernstein. Please go ahead, sir.
Hi, Bob and Carlos. Just one question really from mine. I guess the others have been answered already, but the U. S. Entree, Bob, We've seen, opening and closing going on in parallel with some states, particularly in the Northeast, relaxing restrictions, and then states in the south re imposing restrictions.
What's your impression of the net momentum at the moment? Are we plateauing, or is it still positive, or are we actually starting to see a net negative for the US on
trade? Well, we think there's more of a net negative on the U S. On trade, which then reverts into a positive for the off trade.
Understood.
Yeah.
Thank you.
The next question is from Chris Pitcher of Redburn. Please go ahead.
Hi there. A couple of questions for me. I'm following up on the US business and some of the earlier questions to sign. Trevor, can you say what you think wholesaler stock levels have gone from them too? And also the same what you've been retailer stocks gone to.
And then within that context, you quote the Nielsen number plus 40. Can you say whether you think that's reflected as the whole off trade? Or whether it it's inflated versus the rest of that. And then secondly, following on from the re domicilation,
question, It's a bigger picture question, but but, you
know, the the use of equity, is this because you see the need for bigger transactions or sellers, smaller companies that are looking perhaps for greater equity participation. And have you missed out on deals in the short term because of your equity structure? Thank you.
Well, I'll just give you a few figures and you configure the rest with regards to the U. S. I mean, our our our shipments, in value terms, were down 4% in the period. Our depletions were up 9%. And our set up numbers Nielsen Wise were the figure you quoted.
In terms of NAPCO, we're talking more around 11%, 12%. So you calculate from there onwards. Clearly, there is, quite a difference, I think, going from sell out to depletions to our shipments. And we'll see, how far we'll go. With regard to equity, I mean, I don't think that in the past, we've suffered from the structure we've had.
The reason we, did the redomic or much more looking forward looking into the long term and having the flexibility to generate different types of deals than we've had in the past.
Thank you. Perhaps can I ask one quick follow-up on on Mexico? We'll have to write a note. Could can you say whether there was a meaningful sequential improvement in okay, during the quarter?
No. We haven't seen, at least on our portfolio, any meaningful improvement in, in, like, Sachoa.
Thank you very much.
For any
further questions, The next question is from Paola Carboni of Equita SIM. Please go ahead, madam.
Yes. Hi. Good morning, everybody. Good morning. Welcome.
We're expecting you. We're betting on the timing
Okay. 2 very quick questions. First of all, I come back on the U. S. Market.
I was wondering whether you noticed at least, like, a bit, closing of the gap between, fill out and your shipments compared to, let's say, April, May, June. So it's, at least sequentially, you've seen, the store, who stayed there, trade, let's say, becoming the a little bit less cautious and, approaching, a little bit more, the the fill out trend so just to understand what, what, could be the exit speed of this, the stocking process in this way. And the second point, sorry, is about the impressive from my point of view, growth of the off trader channel in Northern Europe. I was wondering whether, according to your perception, your understanding that, this might be a structural, list of, consumption, assumption, or is more, let's say, kind of psychological effect of the lockdown. So do you believe that, spirits consumption have increased to a structurally higher level possibly?
Thanks.
Okay. Yes, I mean, with regards to the yes, the U. S, we're seeing So closing of the gap between the various indicators. But as we've indicated, we think that our our shipments will end up meeting and correlating perfectly with our sellout values sometimes during the second half. And I think we don't have any visibility now.
It's to tell you when when that will occur. No, with regards to, the growth of, the strong growth in the off premise, I think there's something important happening here. I think on the consumer level, the resistance to making cocktails at home seriously coming down. Consumers have experienced that they're able to prepare themselves in Negroni or or even a, an apparel spirit or fashion or what have you. We have done really a lot a lot marketing wise to educate the consumer and make it as easy as possible for them.
I think that contributed to it. I think this is we, we as a, you know, industry, our category are sourcing quite a bit from beer. And we're seeing that across different different categories. So net to net, I think it's, it's positive for us. Particularly when, you know, if you consider certain cocktails such as the Negroni, which people habitually would order in the on premise, not necessarily knowing what's within Negroni.
And we've seen an acceleration on Campari And because we've been hammering on the message, no Negroni without any Campari and clarifying to consumers that is built around the Campari, and it's also not that difficult to make at home. So I think, this is this is more here to last for for a while.
Sorry. How are you going on that? This is, I don't I don't understand your comments about North Durov, Would
you see anything different from the call Bonnie. Could you please speak closer to the microphone?
Can you hear me? Sorry?
Yeah. Now we can. Yeah.
Okay. Sorry. No, I was saying,
I I
assume, your comments were mainly about Northern Europe,
No, my comments were general because I think those megatrends are true for also Australia as well as North America.
Okay. No. I was mainly referring to Italy where off trade has been also impressively stronger. But in that case, do you also see a structural, change or, more correlated to, to the drop of the on trade and so to to be locked down and possibly I mean, the net balance, to stay unchanged on a structural level, let's say.
Well, I think we've got a long way to go in I mean, it's at least 70% is on premise. We've seen the off premise grow, but more behind sinter cocktails and it's all behind our Aperitifs. I mean, if you look at the IRI data, we're the ones moving the needle. It's and it's aperol. It's not anything else.
So we're coming from a very low base entity, positive, encouraging, but I do think that the on premise will continue to be the channel impacting and moving the needles and the dials immediately forward.
Okay. Thank you very much.
Thank you.
The next question is from Ryan Simpson of JP Morgan. Please go ahead, please.
Good afternoon, gentlemen. Just one sort of question for me, please, just around the balance sheet and free cash generally. Just wondering if you could walk us through some of the moving parts that we should expect into the second half of the year, particularly around, working capital and CapEx And also, could you could you confirm whether your, Compari's comp is continuing with the rest of the million share buyback for the balance of the year?
Yeah. I will, I
will take this question. With regards to the the shirt type rack, you know, in Q3, we have, you know, acquired 7,700,000, shares in the contest of the withdrawal, mechanism accounting for roughly 1,000,000. That has to be, you know, highlighted as a cash outlay with, you know, and overall, let's call it negative carry, not cost because it will not be recognized in the P and L. It would be recognized in the in the equity of €3.4,000,000 based on the difference between the withdrawal price of a 3.76 and the and the and the the price of the settlement date. So that that that's one.
With regards to the to the CapEx, as you may remember, you know, we've cut our CapEx spend by €10,000,000, but on the other hand, we have, you know, increment CapEx due to the newly acquired businesses in Mexico and Martinica, the rest, which, in aggregate, will account for Miviana Euro. So, you know, for the for the full year, we're still confirming our, CapEx guidance of Paul 1919 is your 00990. And then, you know, yes, with regards to the the operating working capital. There is a part of operating working capital that is not compressible. That is, you know, the aging liquid, which at the June end accounted for roughly €380,000,000.
And the rest of the of the operating working capital, will basically close according 2 top line clients, I mean, payable receivable and the rest of the, and the rest of the, inventory So if you take, as a benchmark last year, the rest of the operating work in Canada, that is not excluding maturing inventory accounted for 17.9 percent of top line of net sales. So we're not expecting, you know, we're being, you know, equal, major drifts in operating working capital.
The next question comes from Michael Bacagno of Kepler. Please go ahead, sir.
Yes. Good afternoon. A clarification of the corporate governance. If I have understood well in 2028, the shareholders will have a matured and ask for the 10 votes per one for for one share. We'd be able in easily to go to 20 votes for 1 shares or to 30 votes for 1 share and from when?
20.
To 20 immediately, basically. So if they go from 5 to 20, basically.
Oh, for those who are intelligent to, you know, SBS class C. So, you know, they already have, you know, the 10 working rides. They can convert, you know, the the the SDS class c plus the, you know, the relevant ordinary share. That is, you know, linked to the to the SBS Class C into 1 special ordinary share. Keeping 20 votes.
Okay. But your share capital will be unchanged, you know, if only about voltages.
So you do not have to add the 10 plus the 20, it's 20 in total.
Okay. Thank you.
The next question is from Pinar Eiragun of Morgan Stanley. Please go ahead.
Hi. Thank you for taking my questions. I have 3 quick ones. Bob, I was quite intrigued about some of the things you said on the first one is longer term with more people consuming your products at home. I think that might lead to any changes in consumer behavior in the future.
For example, could this change consumer's willingness to pay what they used to pay in the on premise now that they're more accustomed easily preparing aperol spritz at home. The second one is I also found interesting to hear that you don't expect restocking. Could you please elaborate a little bit on that? And finally, a quick one on gross margins, given the strong negative mix impact actually I thought the decline in gross margin was not too bad. So in terms of moving parts, were there any positive offsets?
Thank you.
Well, I'll take the first two questions. I mean, with regard to the first one consumer behavior and how will they react? Will they be willing to pay what they use to pay in the on premise. Frankly, I don't have any crystal ball at this stage, and we haven't been able to gather any insights out of that, I think, time I will tell. Clearly one thing has happened, it is the consumer has identified that they can actually make themselves a rather good cocktails at home.
So the, off premise opportunity, for cocktails, taking share from beer. What can you going forward? With regard to the restocking, why we think we might expect any restocking, I mean, given the economic environment and also the fact that, you know, quite a few on premise outlets haven't reopened, depending on the market we're talking from 20% to 30%. That is obviously the ethane quite some pressure on the working capital of wholesalers and on the credit, which they've extended to their customers. So, we don't see them restocking within that overall environment.
Talking to the gross margin trend and more broadly to the the operating, leverage, you know, being, you know, positive or negative as we, you know, have already highlighted, basically, under the current constant fees, our P and L is is negatively impacted by 2 key factors. Number 1 is the short term negative sales mix. You know, as you may remember, you know, we we were under, you know, a, you know, a long term, gross margin punch on TriNet driven by positive sales mix prior to COVID. So, you know, what what we're seeing now is the effect of, of of a situation where where, you know, the the high margin and global priorities and particularly the aperities are barely hit by by by the restrict in the on trade channel in multiple markets. And that's secondly is, you know, the negative, operating leverage that is driven to the fact that if we look at our P and M overall, 35 to 40% of our spending is is fixed.
And, you know, talking to the gross margin with the cost of goods sold, like, 1 quarter over 25% is is fixed. So whenever you have a a top line decline, you you you you basically have, you know, the the double whammy of having negative sales mix of plus and negative, operating leverage. 10% of the NMP spend is fixed, and and 80% of our SG and A are are fixed. If, as we do, you do not want to implement, you know, drastic reorganizations, which will compromise the ability of the group to bounce back once the business gets to its, normality mode. So that's the key driver of the gross margin, of course, we've implemented some measures to contain those negative effects.
But when you have such negative sales mix and, and de leverage, you know, the the step master you can do. But what we can say is that we remain fairly confident and bullish vis a vis the ability to of the group to get back to its trend of gross margin expansion in the midterm as soon as you know, the market conditions do stabilize. That's that's that's something which is destined to stay. And for the short term, we need just to navigate through through the store.
Thank you.
Chenari and Richelan of MainFirst. Please go ahead, madam.
Hi. Good afternoon, everyone. One on the Sugar business. So I just wanted to make sure I understood correctly, but do you mean that now you might be looking to exited or not operated yourself after consultation and the impact on social consequences. And if so, could you remind us what was a good track to gross profit from that business?
And my second question would be on the emerging market how do you see trends evolving there and the sell in, sell out, playing out mainly thinking about Latin America. Thank you.
So with regards to the, you know, clearly, you know, discussions that we with the unions and the restaurants stakeholders are are according to statistics. So, you know, we do not anticipate much what we can say is that, you know, our, you know, operations in in Jamaica are can be basically, you know, logically divided three cases. If you have, you know, the first case, that is, you know, the sugar, the sugarcane field, the operations, The second one is is the sugar meal. And the third one is, you know, the, you know, the distillation on distilling and and bottling. So the the last piece, is untouched.
So, you know, distilling and and and pausing, it's it works where, you know, we're, incurring in insignificant losses is is the first two pieces. So the agricultural operations and the sugar mill, you know, in aggregate, in prior years, the losses that we've generated, you know, following the the macro changes in the in the sugar, in the sugar market, accounted for a roughly 12, $12,000,000 a a year. So, you know, with a run rate of a 1,000,000 amounts, clearly, you know, the the COVID, pandemic has exacerbated the losses. And so, you know, we we we felt it was time to intervene and stop the the the bleeding. That's, you know, the first two pieces were were not sustainable.
So, you know, we're clearly trying to the, you know, the best possible solution for for the two pieces. And, and, again, we'll have some, some negative one second part of the year, which, we've not, you know, yet, you know, quantified and disclosed in, in isolation on a stand alone basis. And there would be efficiencies that will highly depend on the outcome of, of the discussions with, stakeholders. So it's, it's going to be premature. To give you, you know, a sense of the bank need to vote the of the, efficiencies that we'll be able to observe the loss containment that we'll be able to to achieve.
We believe, you know, by year end, we'll be in a position of giving more color once, you know, the the unions will be, recognized?
With regards to trends in emerging markets, I think the rule of how dependent is the market on the on versus the on, which we've seen in Western markets also in factored in one way or another, trading in emerging markets. Now, if your specific question is South America, We've also seen, you know, consumers down trading in the off premise to better value, brands.
Okay, thank you. And just one for that on
the sugar business, the one off for this year, they're included in the $25,000,000 incremental you've mentioned in the
Yes. They are.
Okay. Thank you.
You have a follow-up question from Mr. Ryan Sintan of JP Morgan. Go ahead.
Yeah. Thanks for the op the opportunity to follow-up. Just following on from the previous and around sort of changing consumption patterns, you know, short term, but the long term implications could be. I know you mentioned that you cut you've put a lot more of your A and P spend in terms of ecommerce, particularly given the time to go you know, the state that you've taken, like, could you give us a sense of how big e commerce sales are, of your mix currently or how they grew during the first half of the second quarter, 50 during the COVID crisis. And if you have, let's give any color in terms of your long term ambitions for ecommerce sales?
Maybe how they can vary between different markets, your UK, Europe versus North America? Thank you.
Well, with regards to e commerce, what we've seen is basically triple digit growth, but from a very low base across markets, I mean, very strong growth, but the base is very different. The most advanced market is the UK where currently it's probably accounts around 5% of our sales, whereas in the U. S. Depending on the month, it's between 1% 2%. And I would say the rest of the world is closer to the U.
S. And to the UK. Clearly, this is an area which will develop self, but I think it's not only interesting from a commerce standpoint, but also from a brand building standpoint. So this is something we're looking into, very, very serious please. But with regards to also clarifying, you know, clearly in this moment, there's more action in the premise and consumers have, you know, overcome their hang ups with regards to making cocktails at home.
So I think, you know, this generation will be impacted by that. But we also think that mid to long term, there's absolutely no reason why the on prem wouldn't come back. I mean, if you look at the Spanish flu, the on premise came back. If you look at the Hong Kong flu in the 60, 70, the on premise came back any of the major global financial crises, the on premise came back. So it will come back.
And I think it will be much more dependent on progress, science does in the area of really, medical relief and Zacks.
Thanks for that. And just if I look, And so, like, the the kind of investment you made is up just a sort of a one off with your cabin market, or would you consider some of their partnerships elsewhere in the world?
I mean, we would consider them, but obviously, the regulatory environment is very different from country to country.
Okay. Thank you
next question is from Ms. Alessandro Tortora of Mediobanca. Please go ahead.
Yes, thanks. Good morning to everybody. I have a question, very, very quick question. The first one is on the agave prices. I would like to understand that if you have any evidence of a stabilization of the price of agave I recently had the formula and other competitor.
The second is on the, dynamics on the EBIT margin side. I know that there are a lot of moving parts. What I would like to understand is if only for the perimeter effect, change perimeter, you can give us an idea of the full year impact considering all the the is entering your perimeter? Thanks.
Yes. With regards to the agave, you know, the, you know, the, the very good news that, that we have, is that that actually, you know, notwithstanding the significant increase in, in the category, in tequila category in the, in the US, It's, it's, it's still, you know, the, you know, the price that is, you know, unexpected in a way than another. The price is not negatively reacting to the increased, request and demand from the industry. You know, the the the price remained stable. But, notwithstanding the double digit increase in, in demand, which bodes very well for 20 21.
We believe that, you know, if, you know, the the the demand stabilizes at the current level, it's potentially more likely that the agave price will start falling But, at the moment, basically, we're still buying, you know, at the same, at the same price as we were buying, you know, a quarter 3 months ago. So we're not seeing yet to the decline in, in aggregate price. But, you know, we're more confident now that things should co better going forward. With regards to the full year, expect you know, perimeter impact, you know, actually, we will have, you know, a dilutive effect, due to the fact that you know, the, you know, the the acquisition of of RSA, our, you know, French distributor, you know, accord in a very, you know, unfortunate period of time with COVID impacting the, the, you know, the the market. And on top of data, we had to destock, you know, the distributor ahead of, and following the the, you know, the issue.
So, basically, technically, whenever you have a first time consolidation, I'm gonna acquire business, the stop that is sitting at distributor level, you know, is reclassifying side as your own stock. So basically, you're impairing a portion of your shipments to distributor. So overall, for the full year perimeter is expected to come in at about, you know, 1,000,000 with about, you know, overall a loss of, 5000000 to 1000000, including the negative the impact of, you know, termination of certain distributor, distribution agreements, and, you know, the effects of validation of Reste, Umantir and Anshwar Reyes, and Montalobos, both brands, you know, highly skewed to the, to the Android channel. So they will not, you know, generate, you know, profit this year. So that's, that's the the the visibility that we have at the moment.
Okay. Thanks.
Mr. Conte Concewitz at this time, sir, there are no questions registered.
Well, thank you very much for joining us. We wish you, a very nice August, nice summer. Stay safe, stay well and grant me to show some little luxuries like Upper with Susan Negoti. Look forward to sooner than later getting to meet in person. Thanks.
Bye bye. Bye bye.
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