Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group 2019 Full Year Results Presentation. As a reminder, all participants are in At this time, I would like to turn the conference over to Mr. Bob Consecutive, Chief Executive Officer of Campari.
Please go ahead, sir.
Thank you very much. Good evening to all, and thank you very much for joining us on this, on this call. We have quite a bit to cover today, so I'll jump straight into it with our full year results. If you can join me on page number 4 of our presentation, I'll kick off with the key highlights. As you can see from the numbers, we have a sustained nice positive top line, enabling us to continue fueling investments also back into the business.
For its future growth. Looking at the net sales, on an organic side, we grew 5.9% and this is by some selective destocking in Japan as well as South Africa ahead of changes in route to market. We've had consistent outperformance of our key high margin brands in core developed markets. Looking at it by Brian Cluster, our global priorities outperformed, they grew by 7.3 percent, mainly driven by Aperol and Campawi. Our regional priorities are up 4.3% thanks to Espolon.
Most local priorities are up 1.8% Thanks for the single serve up the ITs, Crodino and Campari in Italy, as well as a wild turkey ready to drink in Australia. Looking at it by geography, we have a good performance and I have high margin markets, mostly driven by the U. S, Italy and the rest of Europe. We also have a recovery in South America and Russia, but as you know, this is a quite a volatile environment. On a reported basis, our net sales grew by 7 point percent.
And this reflects a slight negative perimeter effect of, 0.4%. But a nice positive foreign exchange effect of 2.1 percent or EUR 36,000,000. And this is mostly due to a strength in U. S. Dollar versus the euro.
Moving on to EBIT and adjusted EBIT on an organic basis, it grew by 6.7 spend. So this is slightly ahead of our organic sales growth, leading to 20 basis points of margin accretion. This you can imagine, it's driven by the organic gross margin expansion of 60 basis points, thanks to the positive sales mix And despite, I must say, despite the Agave headwinds and, following the investments back into the business, A and P and SG and A together are diluted by 40 bps. In Q4, organic gross margin was slightly accretive only 10 basis points, but this was largely hindered by a very tough comp base last year where we've grown it by 2.30 basis points. On a reported basis, we have a change of 7.7% which takes into account the negative perimeter of 0.7% and a positive FX of positive 1.7 percent.
Net profit on an adjusted basis reached 267,400,000 It's up by 7.3%. And on a reported basis, it reached $308,400,000, up 4.1%. Cash flow, free cash flows generated stood at $258,500,000, of which recurring free cash flow of 267,300,000 On the back of this, net debt came down to $777,400,000, which is a reduction $68,900,000 versus previous year, driven by the positive cash flow, and it's obviously net of acquisitions as well as the real estate disposal and the incremental debt generated by the adoption of IFRS 16 leases. So this brings us to a net debt to EBITDA adjusted ratio of one point six times at the end of last year. We have a few other important resolutions to share.
First of all, on the dividend, The board is increasing a proposed full year dividend to 0.0.55 per share. So in other words, an increase of 10% versus last year. And with regards to share buybacks, we'll have the continuation of a share buyback program, which will be implemented up to an increased amount of 1,000,000 in the next 12 months. Moving on to Chart number 5, let's say, overview of the 5 pass 5 years and how we're delivering on strategy and you can see a positive margin expansion, which is driven by the ad proformas of the core, high margin brands and market combinations. The top of the chart, you see the outperformance of the global priorities versus the group average.
On the bottom left, you see the gross margin improvement. Which on a cumulative basis, over 5 years, reached 750 bps, of which important to say 450 bps organic. And on the other side, the adjusted EBIT, a cumulative increase of 300 basis points, of which 140 basis points organic. So the strong gross margin expansion driven by our sales mix improvement continued to fuel consistent reinvestments in brand building as well as strengthening our infrastructure Moving on to page number 9, just to say that you can see there's a healthy balance between developed and emerging markets, AT versus 20. The U.
S. Continuing to, increase the share of the pie up to close to 27%, 26.9% to be exact and into the our 2nd market at 19.9%. Moving on to our 1st region, the Americas overall, a nice organic growth of 5.8%. Excuse me one second. The US grew by 5.3%.
Which is overall quite positive, double digit growth on Aperol, up 33.9% in shipments, but actually our depletions were up by 50%. So that shows you the momentum of
the brand. Espolon up
34.4%. Russell's also double digit at 18.1%. We've also had positive performance to the Campari, Wild Turkey, Rain the field of proof in Comani. Chinana and Avana also registered positive growth, quite strong growth but of a small base. And as you can expect, Sky declined due to both the competitive pressures and flavors, but mostly due to also the destocking we've done on that sub range of the of the brand.
Moving on to Jamaica. Jamaica had a very strong year, up 17.6%. And as you know, this is quite a sizable subsidiary for us. Very good performance, consistent, and on the right brands driving the mix with core gray nephew overproof growing 22.2 Percent Appleton Estates, growing about 50 percent, Magnum Toni Quine, 26.4, and Campari 8.8%. Canada, up 2.6% overall positive, thanks to very strong double digit growth of Aperol Espolonin Campari.
Which mitigated the slight decline on Appleton Estate as well as Forte Creek. Brazil came back, grew by 3.3% given the circumstances overall satisfactory growth, but clearly, the environment remains volatile. For rest of the region, group by 1% with Mexico leading the pack. And, that's about it, I think. Not much more to go into.
Moving on to the following page, Southern Europe, Middle East and Africa, again, a very solid performance growing by 5.3% organic 3, a very strong performance in Italy, up 5.8% and this was in the context of the market, which is flattish, it really shows the great performance of our ALC portfolio where we're continuing to take share of road across other beverage categories. With double digit growth of Aperol of 16 years in a row, up 12.8%, very nice growth of Campari 8.3% So this year, we'll be celebrating 160 years of Campari and will reach an all time high, which is pretty nice to have. And a very nice return to growth although low single digits on the large local Aperitifs, such as Crodino and Campari Soda. The rest of the region grew by 3.9% France, which hopefully will become a wholly owned subsidiary by theendofthismonth grew by 14.2%. Again, thanks to the double digit growth of Aperol and Ricadonna, while Spain declined overall 1.4% as positive growth in Aperol and Cinzano as offset by weakness in Bulldog as well as the fact that one key retailer actually decided to de list all, branded spirits.
Looking into the African market, Nigeria is a very nice big growing behind Campari, American Annie. On the other hand, in South Africa, we basically destock the market in certain parts of the market ahead of route to market change. Global Travel Retail was up 4.1 percent, again, with the strong growth of Aperol Campari in Glencore. Moving on to North Central Eastern Europe, after a very strong 8.8%. Germany, up 3.3%.
Here, we have a very strong double digit growth of Aperol. This despite, being a pretty poor summer. Apparel was up 18.2%, and we're continuing to leverage new consumption occasions, as well as deseasonalization on this key brand. We have positive trends in Uozu Avernas, Skye, Rodino, Frangelico and Glencore, so a real nice picture. What is a little bit depressing it is the higher volume, ginsano brand But that, again, to a certain extent, is a reflection of the improved sales mix and what we're driving.
The UK, had another very positive year, up almost 40%, 59.6%, an accelerated trend clearly sustained by the growth of Aperol up 23% as well as our Jamaican brands portfolio, which grew by 42%. Largely, green nephew overproof and magnetonic. From a small base, but again, it's important because the brand is growing across market Espoila also did quite well in the UK. Russia came back growing almost 12%, driven 0.9%, but this is clearly often an easy comparison base. 2018, we were down 11.4%.
The market is showing signs of recovery remains volatile, but with very positive trends behind Aperol, and particularly on our higher, marginality, sparkling wines such as Mondoro. The rest of the region was up at healthy 6.5%, evenly spread across all of our key markets. Again, driven by Aperol and company. Moving on to our last region, Asia Pacific, up 0.8%, Australia, up 2% on a shipment basis, but actually if you look at consumption data and the patient data, we grew at three times that rate. Clearly, there are changes in one of our largest retail customers, which impacted stocks across the industry.
So having said that, very satisfactory performance, you need to bear in mind also the tough comp base. We were up 10.5% the previous year. And again, the bush fire didn't really help. The rest of the region is down 1.8%. This overall decline clearly is driven by the Japanese market, where we're destocking ahead of route to market change, and I'll take you more through the details of this at the end of the presentation.
China on the back of Transcai, Cinzano and Aperol did quite well, and as well as New Zealand. Moving on to the following page. It's good to see that our global priorities are continuing to grow their weight over the overall portfolio, up by 100 basis points versus previous year. Moving on to our largest brand on page number 15, Aperol 18% of our sales, up 20.5%. And it's nice to see this solid double digit growth across all of our key markets.
On a five year average, we've been growing the brand by 19.7%. And as I said, a very good momentum both in established high potential market as well as seeding markets. Moving on to analysis by the types of markets on the core established had previously taken you through the Italian numbers up 12.8%. It's very important to reflect that this is the 16th year in a row. And, clearly, our strategies are working and bode well for the future in other markets.
Germany grew also by 18.2% and we've also had very strong double digit growth behind Austria and Switzerland. Looking at high potential markets, solid shipments in the U S, 43.9%, but as I said, depletions were up by a stronger 50% And this, clearly also on the back of a quite tough comp base as the brand had grown by almost 74% the previous year. Canada also solid double digits, up 54%. Russia, actually becoming the 4th largest market, growing by almost 63%. We talked about the UK previously, very nice strong double digit growth in France up 42% Spain, 18% travel retail by 23% in Australia, 23%.
So you can see that the brand is really firing on all its cylinders across all of our markets and growing much faster than those announced numbers in all of our regional markets. Moving on to Campari. Campari is our 2nd largest brand, 10% of sales, it grew by 4.6% Now if we factored, you know, taking into account the destocking, which we drove in Japan, the real underlying growth rate of the brand in the year was 60% on an organic basis. The year was also hindered by a soft performance in its 3rd largest market, Germany, where we took financial price increase at the beginning of the year in January and that clearly the price increase, created quite a bit of interest in the brand in Q4 2018 ahead of the price repositioning. So we paid that back the following year.
Looking at on a region basis. So in Europe, Middle East, Africa, core Italy growing 8.3%. What's driving this is are easy, both the classic cocktails, particularly Negroni, as well as our easy mixes, such as the Campari Spreads and the Campari and tonic. North Central And Eastern Europe, I described what happened in Germany earlier. We've gotten nice traction in the rest of the region.
In the Americas, the U. S. Is clearly doing very well. Shipments grew by 9.6%. Actually depletions grew double digit in the case as well.
The US is our 2nd market in terms of value terms. So having that momentum, obviously, is great. And we're also extending the range of the drinks going beyond the Negroni as well to the Americano and the Buddha Valdez. Argentina recovered from an easier comp base, Brazil also and in Brazil particularly, we registered double digit growth net. Solid growth in Jamaica and Canada and in Asia Pacific, clearly the overall number was impacted by the destocking in Japan.
Moving on to Sky, Sky, 8% of our total, down 3.8%. Clearly, this is largely driven by the core U. S. By the destocking activity, we conducted, in this market, particularly on the sky infusions range. And this lasted till the end of the first quarter with some tailwind effects in Q4 of the year.
International markets, which are for 27% of the value were flattish because the destocking in South Africa impacted the overall positive growth in the other markets. Looking into the detail of the international markets, while good growth in Argentina, which is the 5th largest double digit growth in Mexico, some weakness in Brazil where it's only very, very cheap podcast, which are performing at the moment. Within Southern Europe, Middle East Africa, growth in GTR was unable to offset some slight declines in Italy and Spain. Again, South Africa is the one which moved the needle in this area. North Central And Eastern Europe, very nice double digit growth in Germany, which is a very profitable market for us, but some weakness in the UK.
Asia Pac did very nicely in China. As well as in Australia. Moving on to Wild Turkey, also 8% of our sales, up 2.9%, on an organic basis. And this was after some declines in the fourth quarter, where we had some phasing effects in the core U. S.
Market. Where actually our decreases were double digit. The Wild Turkey Bourbon grew, by 0.4% and this is quite a bit affected by the destocking in Japan. Russell's reserves, which is our premium offering, grew very solidly up 16.7%. American Honey also up 6% and that's driven by the U.
S. Market as well as Nigeria. If we look at that on a market basis, what we're seeing is in the U. S, we are premiumizing our offering with premium extensions such as long branch, Russell's Reserve and Master's Keep continuing to grow at very strong double digits. Overall positive performance of 1.4% and this was affected by slowdown on Wild Turkey 101 which was, hurt by price repositioning, but we have clear very strong plans behind that expression this year.
So we expect to see it to regain traction. Overall, the brand is pursuing very nicely in its quest of becoming it's our choice for hiring mixologists and pony sales, and we're clearly leveraging, in a very positive manner, our, long running association with Matthew McConaughey. In international markets, which obviously, if you exclude Japan in Australia, They're very much seeding markets, but we're doing very, very nice in Germany, Italy and Austria. Japan, declined by double digits due to destocking, ahead of the mid term market changes. And Australia was slightly down due to the impact of some decisions taken by one retailer.
Moving on to how now now being was slightly down 0.9%. Overall flattish performance where clearly, there was a reversal in Q4 was driven by the U. S, which where we were up 8.1%. We're continuing to do the right thing on the brand. Growing it for the long term with the right strategy, premiumizing it with the Tuesdays, and it was a very clear drinking strategy.
In the U. S, the brand grew nicely 2.2%. Unfortunately, 2nd market Canada was flat because we took a significant price repositioning in its largest province, Quebec, which was allowed to, clearly, this is something which we will cycle. And improve upon this year. Very nicely growing in the Grand Margarita in Mexico.
Southern Europe, well, let's say, Europe And Asia Pacific overall soft performance because what we decided to do was essentially devious the one meter so that we could reserve it exclusively. So we de listed it from the off premise and, kept it exclusive to GTR as well as the on premise. Obviously, this has a short term impact on the brand. Moving on to the Jamaican runs on page number 25, doing very nicely, up 7.5% a very positive outperformance of Rainy Overproof, which is a specialty brand, on the other hand, Appleton Estate was impacted by temporary finance on core North American markets in Q4 as we prepare some important, changes on the brand this year. Rayneck Fieldberproof grew 15.1%.
It's becoming a mixologist Darling and expanding beyond its heartland of, Jamaica into the U. S. Canada and the UK. Appleton Estate on the other hand declined by 1.7% despite a very strong performance in Jamaica. Again, we're preparing the future on this brand.
Looking at Biogen, I think it's quite clear what we what happened in the Americas, looking at the rest of the world, very nice performance in the UK, where we're going beyond the Jamaican diaspora and, positive progression in all of our TV markets. Moving on to the regional priorities on Page number 27, you can see that Espolon is continuing to do very, very nicely. It's clearly outperforming the category, growing by 32.4%. Bulldog is being challenged in its, core markets, Spain and Belgium. Where the category overall has been invaded by a plethora of innovations.
So net to net, the brand is down 3.2%. Glyn Grant in line with expectations. The premiumization strategy is working. As you know, we are limiting the volumes so that we can create a inventory of a really aged expressions. Having said that, those expressions we're putting into GTR doing a really well as the brand is growing double digit in that channel.
So it's proving that the strategy is on track. 40 Creek down 4.2%, impacted mostly by Canada where we had, on the one hand, a very, very tough comp base previous year, up 12.4% and also some execution issues and its secondary provinces outside of Ontario. Our cognac is King Du Boucher grew 6.7% from a slot small basis. You can see that we have almost a 45% decline in Q4, and that is basically we're phasing out the previous packaging and the range as we relaunched it in Q1 of this year. Looking at the Italian betas and occurs, overall flattish, what we see some soft performance mostly in the Frangelico brand as well as the bitters activity.
Whereas, again, we're improving the mix from a country perspective by growing very nicely in Germany and the U. S. Cinzano is down by 6.9%. The key driver here was Vernu. What we did was we relaunched the vermouth this year, changing the formulation, going from a wine based formulation to a spirits based formulation.
So making it a traditional vermouth again. This obviously had a big increase in pricing, and this is something we'll cycle through, but we think it's the right thing to do for the brand as we see vermouth becoming real vermouth becoming an exciting category again. Moving on to our sparkling wines, Mondoro and Ricadonna, nice growth of 8.5%. And this is clearly the performance of Mondoro, which is a higher margin brand in Russia, and the Aperol spreads fueling the growth of Ricadone in international markets. To close-up with our local priorities, very happy to see Campari Soda and Crodino returning to positive growth.
Up 1.6% on soda, 2.4%. The organic change in Q4 was expected, so it's not that to be seen as an inversion of the trend on the brands. We're outperforming in Bourbon RTDs in Australia, up 5% The only notes, negative notes on the local portfolio and weighing quite a bit because of their size are our Brazilian brands, which were down 5.1 and Ouzo is doing nicely driven by Germany, as well as some signs of, vitality in the U. S. And UK.
Growing overall by 3% and Cabo Wabo growing by 3.7%. Again, this is below the, depletions, which grew high single digit. I will skip all the pretty pictures and then hand over to Bravo.
Thank you, Barbara. If you follow me to then to page 35, segment reporting, the Americas region, as we can see on a reported basis, and I'd say that we're 10.3% and EBIT was up 6.1% in value. Most importantly, in existing bids, NASA, you know, what we call, you know, organic change. Let's say, we're up at 5.8% and easy up to 2.5% in value. Driving 70 basis points of dilution.
In, in existing business, gross profit was up in value 5.4%. Slightly behind the top line growth leading to 20 basis point margin dilution, where a very positive sales mix in high margin markets like the U. S. Was more than offset by the increasingly negative impact of Acre. Which at group level accounted for 30 basis points of negative impact on gross profit and EBITDA.
As well as the dilutive impact of the recovery in certain emerging markets in this region, Brazil and Argentina. Which, you know, together with other emerging markets accounted at group level for 30 basis points of gross profit and EBIT dilution. Advertising and promotion, growth in value was 9.6% ahead of top line, driving 70 basis points of dilution due to the increased, brand building investments, but equally behind certain brands like Apple Campari, Grandmani, and the Espolon, which is, you know, as we saw before, growing, double digit. The SA increase was in value 4.7 percent below, top line, driving 20 basis points of margin accretion, thanks to the efforts of our South American management to downsize their local structure and contain, you know, the, their costs. Moving on to page 36, Simea.
On a reported basis, net sales were up 3.9% and EBIT was up 5 5.5% in existing business. And I'd say it went up 5.3% in EBIT, 8.4% driving 50 basis points of EBITDA margin expansion. And this very strong performance was achieved spite a lower contribution in the South African market due to the destocking ahead of the already anticipated route to market change. In existing business, a gross profit, grew in value by 6.9 center, driving 100 basis points of margin accretion, thanks to a very solid performance of high margin brands, like, Aperol and Campari across the whole region, I would say. A and P in value was up 0.4%, highs of, top line, driving 20 basis point margin dilution.
Again, also in this region due to the stepped up investment behind, our global priority portfolio in particular, the, in particular, the the apparel brand. SG and A were up in value by 6.4% ahead of the top line leading to 30 basis point margin dilution, and this was due primarily due to the strengthening of our central structures. Page 37, we had the analysis of the Northern Central Eastern Europe regional, region. The the reported change in net sales account 49.7 percent. EBIT on a reported basis was up 15.5%.
In existing business, sir, the the performance was, you know, quite strong. With the top line up 8.8% and even up 14.3% driving a very healthy 160 basis point margin accretion in the region. In, in existing business, gross profit was up in value ahead of top line by 11.4% driving, 150 basis point margin accretion due to, you know, a very strong sales mix evolution by both brand and market with, a very positive performance of high margin brands like, you know, Aperol and in and more broadly, the whole alternative portfolio in, in core high margin markets such as Germany, the UK, Switzerland, and Austria. The AFP was, up in value by 7.5%, which is, you know, a remarkable risks in AMP, but below the top line leading to 20 basis points, attrition. And the SG and A, were up 9% in value due to the stepped up investments on our commercial capabilities, but overall neutral on March Moving on to Page 38, we have, you know, the analysis of the Asia Pac region, you know, the smaller region for us, was, on a reported basis, top line, flat fish and bottom line declining by 16.5%.
Which, basically, you know, mirrors the results of our organic performance. So it was, you know, flattish top line and slightly up to the 0.8% and a declining EBIT of 25%, driving 240 basis point EBIT margin dilution in the region. Gross profit in value was up 2.4 percent ahead of top line, driving 70 basis point margin accretion, thanks to a very positive sales mix in the biggest market for the region, which is, Australia. We help us compensate the, the negative impact of the destocking in the Japanese market, which negatively affected the performance, as we saw before, of the Campari and Wild Turkey brand. The E and P, was British year on year, driving 10 basis points margin accretion.
While the SG and A were up in a significant manner, 15.2% in value, well above the top line driving that 170 basis point margin dilution. The, the significant increase in SG and A in the region was due to, on one hand, that we had a lower absorption of fixed costs due to the contained top line growth, but, you know, more most notably. And importantly, the increase in cost was due to the announcement of the regional, of the region commercial structure and moreover, the provisions in connection with the transfer of the regional exporter from Sydney to Singapore. Moving on to the analysis of our consolidated results, key page 40 and published on page 41. As we can see, EBIT adjusted on a reported basis was up 7.7% in value.
Stable, I wanted to go 1% on sales in line with last year, with any EBIT adjusted organic growth 6.7 percent in value above top line, driving 20 basis points margin, accretion. And this is due to a solid organic gross margin accretion and, you know, which more than compensated in the stepped up investment in marketing and, commercial capability. The adoption of the IFRS seen accounted at the EBIT level for a tiny €1,400,000. EBIT adjusted on a reported basis was up 10.9% value to 26% on net sales, worthwhile, you know, highlighting the fact that the, you know, the proportionally increase in EBITDA adjusted in value vis a vis the EBIT adjusted increase is due to the impact of, yeah, IFRS 16, of, which accounted for €15,000,000 in in 20 in 2019. Page 42, gross profit on a reported basis was up 9.1% in value to 0.9% on sales with 80 basis point accretion.
The organic growth accounted for 7% in value, 60 basis point margin expansion, after, you know, the negative impact of agave, which, I said before, accounted for 30 basis points, the negative impact of the recovery of emerging markets, which accounted for 30 basis points, talked after by, you know, the negative impact of the destocking, ahead of route to market change in in Japan. So, you know, the underlying 120 basis point, you know, gross margin expansion was basically offset by 60 basis points of combined effect or aggregate. And emerging market recovery. A and P on a reported basis was up 10.6% in value, was point dilution in existing business, we aim to increase accounted for 7.7.7% in value. Leading to 30 basis point margin dilution.
And again, as said before, is due to the step up investments behind brands like Apple Campari, the overall Jamaican brand portfolio as well as, selected the regional priority brands such as, as polo. And the SG and A, on a reported basis, were up 9.2% in value. It was a 30 basis point dilution to 21.3% on net sales in existing business. SG and A were up 6.8% in value leading to 20 basis point margin dilution. Page 43.
The negative operating adjustments, which you know, we've already highlighted in prior calls, you know, accounted for €21,700,000 in 2019. Next financial charges came in at €33,000,000, euros, in line with the prior year. Benefiting from on one end and lower average in debt next due to the very healthy cash flow generation, which was partly compensated by the effect of the reclass for IFRS 16 of 1,000,000 of additional interest charges. The average cost of netbanks grew from 3.3percentto4.1percent again due to the reclass of the, interest charges relating to your IFRS 15. A pretax profit came in at 300 64,600,000 after 1.1 percent, but most importantly, before a one off service for a job group pretax profit came in at 1,000,000, up 6.7% in value in 2018.
Page 44, a group, net profit adjusted, net 267,400,000 after 7.3 percent, year on year, excluding all the one offs, with the recurring effective tax rate of 27.8 cent, down from 28.2 percent of prior year with a cash tax rate, which came in at a 3.5% in line with the prior year. The reported tax rate, came in at 13% reflecting the total net adjustments of, €41,000,000 that you can see, you know, in the, in the, in the, you can see about with, you know, the the the relative breakdown into operating adjustment, financial adjustments and all, you know, the the tax adjustments including the patent box, which accounted for 1,000,000 for, you know, total benefit across the period of 20 14 to 2019 of 1,000,000. Recurring effective tax rate of the overall period period of 2016 to 2019 came down from 32.6% to 27.8% so forth. Page 46, the analysis of free cash flow. On a reported basis, the fact came in at 1,000,001,000,000 after 22,900,000 versus 2018 with the recurring free cash flow at 1 67,000,000 and changed versus prior year.
You know, in terms of, you know, key key key changes. It's on the on the recurring free cash flow. We highlight, you know, an increase in EBITDA year on year of 1,000,000. That is partly compensated by, you know, higher taxes on a recurring basis of 8.6 €1,000,000 with, you know, recurring taxes at €81,100,000, changing working capital of, on an recurring basis, 29,610,000, higher by €4,100,000 versus prior year. Financial expenses at 27,900,000, higher by €5,100,000 versus prior year on a on a recurring basis.
CapEx on, maintenance CapEx came in at €61,100,000. Up 11,400,000 versus prior year. And then we have, you know, a delta of €16,400,000 on other non cash items. And as a consequence of the increase of the EBITDA adjusted, and, you know, a free cash flow that, you know, is basically unchanged at 267 €0.3,000,000 of free cash flow on EBITDA, which is still very healthy, came in at 55.7 percent, you know, below prior year, when it accounted for 61.9%. Page 47, this is operating working capital.
As you can see, we have an increase of €58,800,000 year on year of which 29.6 are coming from organic increase of working capital and €10,500,000 from Forex and €18,800,000 from perimeter. Operating working capital as a percentage of net sales came in at 1,000,000. But, you know, if we carve out the impact of acquisitions on a pro form a basis, operating working capital as a percentage of net sales, Okay. I mean, at 36.7 mill 7 36.7 percent was below the 37.2 percent of the prior year. So 50, 50 basis points operating working capital on sales and compression.
Page 48, CapEx, the the the lending amount of CapEx for fiscal year 2019 is overall at 1,000,000 of which 61, in interest CapEx and €21,000,000 in extra ordinary CapEx on projects brand houses and increase of production capacity. For 2020, we're envisaging a total amount of CapEx in the area of 1,000,000 with, basically, unchanged maintenance and CapEx that's €4,000,000 and for the €30,000,000 of extraordinary CapEx, reflecting investments on extra projects, including, again, Brent Houses. And the other projects. Page 49, we have the, the, you know, the analysis of, you know, the free cash flow, and we had that, you know, in in initial and landing, then, 258,000,000 of reported free cash flow, €28,900,000 of the net value from disposals and acquisitions, which, you know, were, you know, partly, offset by, you know, dividends for €57,000,000 of purchase of on shares of €47,000,000, the impact of the IFRS 16 application that accounted for 1,000,000 Euros and some other movements accounting for 2023.5000000. Lending indebtedness at 1,000,000.
With regards to, you know, the debt maturities, still, you know, a very healthy, you know, picture with long term gross debt, which to that €600,000,000 following the request of the, Eurobond that is expiring in September 2020. Into short term debt, or talking of €581,000,000 cost of data, the coupon on the long term data accounts for 1.61.6% and you have fairly, you know, safe and hedged, position with the fixed interest rates accounting for 68% of the overall long term gross to debt. I think this is it on numbers. I will send back to you on new initiatives and outlook Okay.
Before the outlook, I'd like to take you through 2 very important new initiatives starting with the first one regarding business developments in Asia. As you know, Asia Pac is our smallest region. But looking forward, with the change in consumer taste and habits, we see very good opportunity to accelerate our growth there. Today, most of our business is actually in, you know, Australian and New Zealand. But we see very, very good opportunity brought about by the growth of classic cocktails in all key cities.
As well as Asian consumers acceptance and appreciation of the Apparel spreads, which we see when they're traveling abroad. So on the basis of that, we're undertaking kicking off 3 very important initiatives. The first one regards the relocation of our regional headquarters from Australia to Singapore. And that will occur, within Q1 of this year. So clearly, we'll be, our, our team will be much, much closer to the markets and we'll be able to move faster and much more effectively in all of those core markets.
The second one regards to China, obviously, this isn't this is a little bit of a difficult period due to the coronavirus in China. But we strongly believe in the opportunity for Aperol and Aperol Spritz in the huge Chinese market. We designed up a series of what we call micro battles to actually help us, determine on the on premise answer the 2 key questions where to play and how to win. So in other words, how to best adapt the Aperol model to win the hearts and the palates of the Chinese consumers. There were Aldi's micro battles set to kick off in February clearly, we haven't activated them, but we hope we'll be able to do that at the latest in the beginning of the second half of the year.
But again, this is going to be quite an area of focus both in terms of, management attention as well as financial resources. Lastly, in Japan, which historically has been an important market for us, where we've been with 3rd party distributors we've actually decided to make a move forward and to move to a newly established equity partnership with key local premium spirits operator, and the aim here is to develop, our brands, our whole portfolio, and particularly the premium end, in this key market. We will have an initial stake of 40% of the JV but we have the right to purchase up to 100 percent of the JV starting 2023. Japan currently generates only 1% of our sales but clearly it's another market where we see a very good opportunity both for our pay it's, as well as our whiskeys going forward. The second big initiative, regards France, I mentioned that in, our kickoff.
France is a very important market for us. We announced the signing of the acquisition for 100% of our French distributor, Banffito Ochille, the French distribution. They've been our exclusive distributors, since 2009 and the team there is a very, very strong team and they've done very well for our whole portfolio of brands. As well as some distribution brands, which they have. We expect this deal to close by the end of the first quarter.
Credited subject to customary antitrust approvals. In terms of size, just to
give you an idea, in 2018, If
we look at the numbers from a local, GAAP standpoint, RFP had reported sales of 145,100,000 really this includes the net sales of our brands as well as 3rd party brands. As a market, France via the distributor. So at the lower net sales accounted for 2.2% of the group's net sales, We see it as really a core and very high potential market for the group, the track record, on of our key brands such as Aperol Campari, Ricadone, and Glenn Grant, has been very strong. We've added to our critical mass with Proribier and Ammoni, we really look forward to developing this business going forward. In terms of corporate actions, I took you through the dividend increase with regards to the share buyback program, they implemented for an increased amount up to 1,000,000 in the next 12 months.
And really, the increase of this buyback serves the purpose of implementing a new policy, which we have with regards our to our portfolio of treasury shares. In the in the past, we we always bought back, the the shares in a manner that they were sufficient to serve, those, plans which are about to vest. With this new policy, we're looking at having a portfolio of treasury shares sufficient to serve all outstanding self option plans. So this is obviously a way of hedging the risk and also reducing, the cost of the plan going forward. Lastly, and I'll take you through this more in detail once we've gone through the conclusion and outlook.
We're an the board of directors took the decision today to announce a transfer of the registered office of David Campari Nana SIPIA to the Netherlands with in conjunction and enhancement of the current increased voting mechanism. In terms of our conclusion and outlook, you can see that 2019 was pretty solid. We delivered sustained performance across sales as well as our profit indicators And this despite selective destocking, as well as the, pretty significant negative agave price if We've been able to do this through, thanks to continued sales mix improvement, driven by the outperformance of our key high margin brands in core developed markets. So looking forward into 2020, our outlook remains pretty fairly balanced, both in terms of risks as well as opportunities. We believe that the positive underlying business momentum will continue.
It will be driven again by a combination of key high margin brands in core developed markets. We will see some tail end effect of the destocking activities and those which are linked to route to market changes. Which are expected to impact the first half of the year also on a on top of a tough comp base. So clearly, the phasing this year will be different from last year's. We expect a positive evolution of EBIT organic performance on a value basis, On the other hand, the margin development is expected to reflect both the Agave's increasing the elevated purchase price.
The import tariffs imposed by the U. S. As well as investments in brand building and route to market initiatives for our long term and healthy business building opportunities. On the perimeter, we expect the effect to reflect the recent acquisitions, as well as the agreement related to the acquisition of the French distributor subject, obviously, to antitrust approval. On the other hand, FX is, to be impacted by volatile macro environment.
Having said all of this though, we remain quite confident in delivering a positive performance across all of our key business indicators also this year, 2020. Now before we move on to your questions, if you can, take hold of the 2nd smaller presentation we have for tonight, the one entitled, transfer out the registered office of the Netherlands and Enhancement the current increased voting rights mechanism. I would like to take you through this and then move on to your questions, both on the full year. As well as the fee milestone agreement. In our eyes, that's clearly a new milestone, but it is also in continuity with the with the past.
We we aim to transfer the registered office of the company to the Netherlands. And we also aim to enhance the current double voting rights mechanism for the progressive introduction of additional voting rights. This transaction is currently aimed at encouraging a capital structure, which is more supportive of our external growth strategy in the long run and rewarding a shareholder base with a long term investment horizon and this has always been our group's strategic guidance. The controlling shareholder lacks in a CA confirms its long term commitment to the group strategy and prospects and its support to the transaction. With regards to the company aspects, we will have full continuity, upon the transaction completion, which means that there will be no impact on the organization, management, business operations and employees.
The tax residents of the company will be maintained in Italy. Our legal status will be preserved without any impact on our legal relationships. There will be no accounting impact on financial reporting. Clearly, IFRS are confirmed, will be a sole listing of our ordinary shares on the Italian Stock Exchange and the identity as well as historic presence of the group in Italy. Will be preserved.
Moving on to page number 3 and the compelling rationale for the transaction. It's clearly about us continuing to focus on our long term growth pillars. Through the transfer of the registered office and simultaneous and analysts of the current double voting rights mechanism, we aim to, on the one hand, adopt a flexible share capital structure to allow the company to maintain and further strengthen a loyal and committed shareholding structure while combining this essential goal with the objective of further supporting the group's growth strategy by external opportunities. We want to reward a shareholder base with a long term investment horizon capable of underpinning our long term growth objectives and ambitions in line with our guidance and to benefit week from the corporate law framework, which is highly recognized and appreciated by international investors and market operators. So that we continue to promote the global profile of our group.
While in the meantime, also maintaining culturally the identity and the historic presence of the company in Italy. Skip the next two charts, because I think most
of you pretty much all
know, our track record over the past 20 years, which has been very successful. And what the company and the group looks like today and move on to page number 6 and the key elements of the transaction. So firstly, we'll transfer the Register Office to the Netherlands and adopt the company forms known. And I hope My Dutch friends will not get upset with me when I pronounce the name. Nam Luzet, Denot Shop, NZ, under Dutch law.
There will be an enhancement of the double voting rights mechanism, which is currently in force. And we will adopt a mechanism based on the assignment of special voting shares. We will have an assignment of 2510 voting rights for each ordinary share, which is held for respectively 25 or 10 years. These additional voting rights are subject to the uninterrupted and that's important to underline the uninterrupted holding of ordinary shares. The transfer of the ordinary shares to which the special voting shares are associated and the occurrence of change of control will cause the loss of the benefit of increased voting rights.
Shareholders who are entitled to the current double voting benefit called Voto Majorato in Italian as of the effective date of the transaction, will be entitled to the same benefit immediately thereafter. While loyal shareholders who are not yet entitled, will be allowed to carry over the registration period in a special register for the purpose of the assignment of 2 voting rights. Shareholders who do not support the adoption of the resolution on the transaction will be entitled to exercise their withdrawal rights. Irisco DiRichesso in Italian. The transaction is subject to the satisfaction of a limited number of conditions precedent including the amount of cash to be paid to shareholders exercising their withdrawal rights, not exceeding aggregate the amount of 1,000,000.
And this is calculated after taking into account the amounts payable by the shareholders exercising their option and preemption rights pursuant to applicable law of bad or third parties. Moving on to our quilm tolling shareholder, Lakshfim, and this support to the transaction, Page number 7, our controlling shareholder, Laksin, which they hold 51% of the issued share capital and 65.3% of the voting rights has confirmed its long term commitment to the group's strategy and prospects and its support to the transaction. So for the purpose of strengthening the certainty of the transaction and mitigating the potential cash outflows resulting from the withdrawal process. Bakken have committed to acquire withdrawn shares in the context of the offer and sales process provided from the Italian law after an aggregate amount of 1,000,000, which is basically proportional to their 51% holding. If we look at the special voting mechanism and the detailed description on page number 8, you see free columns, ordinary shares, special voting shares aggregated, voting rights, and then the time horizon.
2 years of uninterrupted ownership, 5 years of uninterrupted ownership, 10 years of uninterrupted ownership. Now currently, 1 ordinary share remains 1 with 1 aggregate voting rate. In 2 years' time, that will equate to after registration, obviously, equate to 1 ordinary share, 1 vote +1 special voting share A, which is equal to 1 vote. So in aggregate, 2 voting rights. Moving on to 5 years, Again, it will be a combination of 1 ordinary share vote, so 1 vote plus 1 special voting share B which will amount to 4 votes, bringing the total to 5 votes.
Moving on to 10 years of uninterrupted ownership will be 1 ordinary share of 1 vote as 1 special voting share C of 9 votes amounting to 10 voting rights. Your ordinary shares will continue to be tradable and listed on the Italian Stock Exchange. They're transferrable. But, clearly ordinary shares associated with the special voting shares are transferable subject to removals from the special register and the ordinary shares will, be the only ones receiving the the dividend. The dividend will be only paid on ordinary shares.
The special voting shares will be non tradable and related to voting rights, which our loss upon transfer of the underlying ordinary share and upon occurrence of a change of control over such shareholders. I think we'll skip page number 9 because it does, clarifying situation as is and to be immediately after our transformation. Moving on to chart number 10. It's important that, we underlined the fact that we're full continuity with the past. Our identity and our historic presence in Italy are preserved.
The ordinary shares will continue to be solely listed on the Italian Stock Exchange of Barcelona. There will be absolutely no reorganization of the group's operational managerial activities, which will continue to be led by the company on a continuous and uninterrupted basis. The company will maintain its own legal status without any impact on its legal relationships, including the relationship with its employees, and these will continue to be governed by Italian law. Our tax residents will be maintained in Italy, no impact on the financial reporting, our statements to continue to be prepared in accordance with IS and IFRS. Our company's share buyback program will continue to increase the amount of $350,000,000 in the next.
In terms of government and the government's framework following the transaction, We will move to 1 tier board system as that provided under Dutch law. There will be no changes in the current composition of the Board of Directors. We will adopt, as I said earlier, the 1 tier board system, and under which the non executive directors will supervise the executive directors In accordance with such corporate governance code, internal committees of the Board of Directors will be established in line with those currently in place. So there will be an audit committee, and there will be a remuneration and appointments committee. The supervisory body, organismal Divigila APSA pursuant to the legislative decree, 231,2001 will be maintained.
And in accordance with the 1 tier board system, the board has statutory auditors from 6 to exist. Closing up with the indicative transaction timetable as well as the key procedures, Clearly today, 18th February announcement of the proposed transaction in the EGM call, on 27th March, we'll have the EGM to approve, deliberate and approve the transaction. In the first half of April, We'll have the period for the exercise of the withdrawal right on the 22nd April. The dividend payment will continue as usual. At the beginning of May, until the end of July, there will be the offer of withdrawn shares in option and preemption to other shareholders, pre transaction closing procedures to follow.
And by the end of July by July 31st, we expect to bring the transaction completion. In terms of withdrawal procedure, the redemption price payable to shareholders, exercising the withdrawal rights is equal to 9 sorry, EUR 8,000,000, EUR 37,000,000 and EUR 6,000,000. Following the period for the exercise of the withdrawal write, withdrawn shares will be offered in option and preemption to other shareholders. And subsequently, the unsold shares may be offered to third parties. The payment of the redemption price of the withdrawn shares is subject to and will occur after the completion of the transaction and withdrawing shareholders may not sell or otherwise dispose of any of the shares in respect to which the withdrawal right has been exercised only until the completion of the transaction.
So this is it in detail. I'll grab a glass of water. And if you're nice enough with your first question, pass it to Paulo. I'll be right with you. Please go ahead.
Okay. Are you ready for your questions?
Yes.
Thank you.
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer The first question comes from Trevor Stirling of Bernstein. Please go ahead, sir.
Hello, Bob. Sorry, I couldn't give you a chance to have some clean ground 18 ahead of the water, but the first question is coming down to you. I suppose two questions related to the corporate transaction, Bob. One is, you say there's no change in the tax residency. But it does look at the big impact here is on the voting rights of the long term shareholders.
Is an implication of that is that there that new shares could be issued with less dilution to voting rights. And the second question related to transaction, is that you mentioned the improved or the favorable corporate tax governance, I think so. I've probably used the wrong word there. But I wonder if you could just talk a little bit about the the tax implications database, and and what the advantage of the transaction is.
Well, Trevor, there are basically no changes from a fiscal perspective. Our fiscal residents remains in Italy, so no changes there. What happens is that, over time, loyal and monitored consumers will receive proportionally over time, additional special voting shares, which will also increase over time. So special voting share, A, is one additional vote. Special voting share B after 5 years is 4 votes, and special voting share C is nine votes over time.
So this clearly rewards long term shareholders and also introduces flexibility into our capital structure, looking to potential external perimeter development of a much larger scale looking forward.
Okay. And could just check, Bob, the those incremental voting rights, they don't occur on day 1. So it's not retrospective. So for instance, like being who have owned their shares for a long time, do they get the 10 years of extroversion loss on day 1, or do they have to wait a another 10 years.
I'll share orders are treated the same way. Clearly, those that have registered their shares currently and have 2 double voting rights, they will continue to have those 2 those double voting rights. Okay. So for the
2 voting rights, to be clear, there is the initial assignment, there is a assignment. The initial assignment is the one where, you know, I'm, you know, register. Are you ready, you know, have, you know, had the the shares for 2 years and immediately receive SDSA special voting shares A. But if I may, a shareholder who's been registered on the register for a year. I don't need to wait to further ears.
You know, in in 12 months, you know, I can applied for a special voting share a had been, you know, an extra vote. You know, the point of, you know, the issuance of those special voting share is that the 2, you know, corporates, the low frameworks, the Italian 1 and the and the Dutch 1 are different. In the Italian legal system, the law allows you to grant increased voting rights, well, in the maximum amount of 2 votes each share, that has been on to the same shareholder. But you can add, you know, both to the very same shares wise, you know, in the Dutch legal system, you have to physically issue, you know, shares, these special voting shares to grant more voting rights. So, you know, it's a it's a nuance, but basically, you know, the the increased, you know, voting mechanism is basically the same, you know, achieving a different manner.
It is enhanced as, you know, from, you know, to to voting rights, you know, over time, you can get to 5 and working rights.
Great. Thank you very much, Paul. If I could just ask a follow-up question on the day to day business. Clearly, you know, significant acceleration in Espolon despite a lot of, a lot of entrants into a 100% agave. Just wondering what you put that down to, Bob, but also a little bit of a deceleration on April.
So from 28% last year, to 20.5% this year. So maybe a little bit of color on those 2 key critical bounds would be great.
Yes. I mean Espolon has been propelled by a very, very, very strong proposition, which is very unique and distinctive, both from the concept, the imagery, the packaging, very high quality liquids, and we've actually moved into prime building mode. So actively working the on premise and running events to recruit new consumers into the, into the franchise. Now with regards to Aperol, I mean, we don't see any really deceleration on the brands. I mean, all of our markets are growing at a very solid double digit rate.
Clearly, the base is different. This year, I mean, last year, we started off a higher base. And at the same time, there's one big delta between the two is that the summer of 2018 in Europe had actually lasted almost to the end of October where this year we had a very poor and damp summer in most of Europe. Lastly, with the tariffs also arriving, we decided to move some shipments of Aperol into the new year.
The next question comes from Javier Gonzalez Lastra of Berenberg. Please go ahead, sir.
For the questions. I had a couple on Asia Pac. I just wonder if you could share with us the, the size of the costs. So if I can call them one of costs that you can cut in the 4th quarter, to move your headquarters from Asia, from Sydney to Singapore and whether there's any kind of guidance you can give us in terms of how much should we expect that to continue, high cost base to continue into Q1, Q2, or maybe, for fiscal 20? And also, together with that, anything you can share in terms of the investment that you're looking at putting into the Chinese market?
To, as you said, develop discretion of And on the second question I'd like to ask on the US, Could you share with us whether there's been already an impact from the tariffs in the fourth quarter and remind us of the overall impact that you're expecting to get on your gross profit on your gross margin? Thank you.
Okay. I'll just take the second question, which was on Aperol in China. What we're planning this year in China is really to run a full battery of mini battles across different cities, different target consumers, different on premise outlets with also different modes of serving the brand so that we can really fine tune the, Aperol success model and adapt it to the Chinese market. So this year, there will be yes, quite a big investment, but it's more on research. And on the basis of this, we will really decide for next year onwards how much more to step up the real A and P behind the brand?
Yes. Let's let's talk, you know, to the margin, you know, overall, you know, what is happening last year and what you know, we're envisaging for this year. So basically, you know, the, you know, I said before, you know, in 2019, we had in our non deadline, gross margin expansion of 120 basis points, which was offset by the gross margin level by the the recovery of emerging markets, which accounted for a 30 basis point in the aggregate for 30 basis points. Looking into 2020, what we're expecting is basically that the underlying gross margin expansions still is confirmed at 100 and 20 basis points. But then you that gross margin expansion will be offset by, you know, the tariffs, which you've mentioned accounting for about 50 basis points roughly 7,000,000 to €8,000,000.
This is the net impact of, you know, our price increase that we're, we're, we're putting on our imports. The agave effect, which is costing us further a 50 basis point or another 1,000,000 And, you know, the tail end effect of sugar that is, you know, a further 20 basis point, a negative effect, or, you know, 4,000,000. So for 2020, we're not envisaging, we're not relying on gross margin expansion to deliver a solid EBIT growth in value terms that we see. So, you know, for 2020, we will, you know, margin expansion will pause for 1 year. And where we'll be relying on our very solid momentum of our key brands in, in key geographies.
This is how we see, you know, 2020. So, you know, we're we're definitely positive on, on EBIT development on a on a full year basis. You know, the, you know, the the one that you've mentioned, you know, APAC, you know, the transfer of the regional headquarter from, from Sydney to Singapore. You know, it had, you know, it came, it came with a with a cost, you know, probably, you know, 1,000,000 to 1,000,000 in, in 2020, in 2019, you know, on a further couple of €1,000,000, you know, this year. But, you know, overall, nothing that we cannot absorb in terms of, you know, in the overall, big theme of things.
So this is the guidance on numbers for 2020.
Okay. Can I ask in terms of the one last question on the Agaba inflation? Because you've guided us very well in previous occasions in terms of, what analysts looking at that market expect potentially in terms of the prices normalizing eventually. And I think last time you mentioned that, that is clearly deferred until at least the late 2020, if not 2021. I just wonder if you could share any any potential changes in those fields.
Yeah. I mean, we we confirm the guidance. So we, you know, we're fairly optimistic vis a vis, you know, getting some significant tailwind in 2021. As you know, the the agave, clearly, the agave price clearly, you know, achieved the it's it's peak. So, you know, we're not seeing an increase in, in the agave price.
Clearly, you know, over the last few months, clearly, you know, if you look at the average cost of agave, across the 2019 and the spot price, you know, that has been stable for a couple of months, still, you know, we have a tail end effect of, you know, the 50 point I've mentioned. But, you know, going forward, you know, just to to frame it, you know, we're talking of, you know, an overall negative impact on our P and L, if we compare the current spot price of 28.29 pesos versus the 6 pesos that it used to be you know, a few few years ago, we're talking of north of 1,000,000, and, you know, looking at the number of plants that we see in the in the fields, you know, where it's, you know, it's a it's a ticking bomb. You know, it's difficult to predict exactly when it will happen. And, you know, our best guess is 2021, but for sure, it will happen. You know, the price will start coming down.
In a meaningful manner and with a quite steep curve when all those plants will hit the market.
Clearly, I mean, the brand has grown to a substantial size in Espolon and continuing to grow at a 30% cliff, it's obvious that it impacts us more this year.
Yes, I mean, now to be retranspal and Eskom has a dilutive impact on our margins to the increase on our average price. You know, as soon as things go the the opposite direction, you know, clearly, sir, would would would become, you know, further driver of the underlying gross margin accretion.
The next question is from Marianne Vucharon of MainFirst. Please go ahead, madam.
Hi, good evening, everyone. A few questions for me, please. The first one, would be on on the US and in the fourth quarter. If you could move, I mean, share with us some of the moving parts that you have been in the region for the grant. I mean, Espolon seems very strong for Mahoney and IP adventure, but what was the the drag Then the second question would be on the distribution within France.
Could you give us what details to help us modeling credit your forward. I mean, on what was the part of your branch that was distributed. That was the sale of the future distribution and what's the impact on margin we should expect?
I'm not sure, sorry, we understood your second question.
I mean, when when you go direct in France as of the as of the 2nd quarter, you have given us what France was in your face in 2019. Now that's to say you recorded, without direct distribution. So what, I mean, how could you help us model it for the next year? And
then, the third
question would be on the change in the structure in what, in what, I mean, how does that help you, with the external growth strategy?
So, you know, talking too fast, you know, the RFP potential acquisition, 1st and foremost, there is a big additional president that is the antitrust approval that is not not yet there.
You know, this is not,
you know, a deal done until Petrobras confirms that as we believe that, you know, it works for them. So, you know, it's, it's basically, you know, you know, the impact will primarily be on perimeter where, you know, we envisaged, we envisaged, you know, an impact of about, €16,000,000 in net sales, and about €1,000,000 in in EBIT. Clearly, you know, there would be you know, a higher contribution in terms of, contribution after AMP, which, you know, offset the incremental SG and A coming from the consolidation of target in an incremental SG and A will be in the region of 1,000,000 to 1,000,000 in perimeter clear not in existing business. So this is how we we model the acquisition if and when it, of course. So this is on a full year basis.
So we need to clearly, that's to be taking into consideration that it really depends when antitrust gives the green light for
closing.
Oh, that's understood.
Yes, on the U. S, I think you need to differentiate between what our depletions and what our shipments, clearly, you see things evening out throughout the year. Net to net, if you look at our U. S. Business, I mean, if you take out Skye Hopka, we're growing high single, if not low double digit across the rest of the portfolio.
So we have a pretty healthy business. And even if you look at Skyvodka actually, our, depletions were better than our shipments, right, consumption is better than our depletions. And compare it to some of our peers, we've actually performed much, much, much better. So the brand is starting to stabilize. And remember that we also drove through a destocking, particularly on the infusions side of the business.
Now moving on to the deferred, structure, I mean, currently, our our shareholders, our loyal shareholders benefit from a double voting right, potentially over time, moving on, you know, 10 years onwards, that can increase to tenfold. So that, obviously, over time, opens up other scenarios where we could actually emit, equity for transformational deals or other strategic partnerships, which we couldn't do at this stage because it would have too much of a dilutive effect.
Okay, thanks. And just following up on the U. S, shall we
look for some, destinations
like year on, I mean, notably for April where you have the pleasure of why you had the shipments this year?
Sorry, I'm not sure. I mean, when the tariffs were announced, We looked at it and we decided to do 2 things. 1, which is to actually reduce shipments on Campari and Aperol and move them to the new year and then also take a 2 points price increase on both brands at the beginning of February, which is what we did.
Alright. Thank you.
The next question comes from Alessandra from Mediobanca. Please go ahead, sir.
Hi. Good evening to everybody. I have, let's say, one question, if you may, a clarification, a follow-up of, the previous question on, Valandro Shield, the the the recent acquisition in France. If you can confirm to us, it's, sorry, 50,000,000 change perimeter at the top line level, And, at the EBITDA level, K, we're talking about change perimeter. You mentioned before the 1,000,000 plus G and A 90,000,000.
Is it, like,
Yeah. After the G and A. So, you know, actually, you know, contribution after the NPL about, you know, 10,000,001,000,000 of SG and A and a positive €1,000,000 of contribution.
Okay. So it's a dynamic impact. It's irrelevant. What is much more important is a clear focus Now that organization will have on growing our portfolio of brands and go beyond, let's say, the 4 or 5 brands, which have grown very successfully in the past.
Okay. And then just if you may, a quick follow-up also on Grand Marnier. So you mentioned in the presentation some softness in Europe. Can you give us, let's say, any update on the strategy in Europe after, let's say, the success you had in the U. S.
Thanks.
I mean, in Europe, the way forward, it's quite clear. I mean, we need to transform the brand from being a gastronomy brand into a cocktail brand. While we're clear, drinking strategy, we're focusing on the on premise and we're driving it. Within the context of that strategy, we also decided to, concentrate the one liter size, so the traditional size or the on premise to actually the on premise and global travel retail which meant shifting the 1 liter bottle in most markets in the off premise to a 0.7 liter. So clearly,
as you make that change, you have volume losses
The next question comes from Paolo Caraboni of Equita SIM. Please go ahead, madam. Yes. Hi. Good evening, everybody.
Two very quick questions, for me. Sorry if you can come back on Australia. You mentioned that it's been, it's matched between consumption and depletion. If you can come back on that. So I probably have lost you.
What's the reason behind that? And, how long could this, still impact? And, secondly, you have referred in your presentation to extraordinary CapEx also in 2024. Some extra projects. I would also appreciate if you can elaborate a bit on that.
Can you
take the Australian 1? It's relatively simple.
I mean, we grew 2.3%
in Australia. Whereas, overall, we grew a little bit more than 6%. If you look at consumption data, as well as, depletions to, from wholesalers to the on premise. The reason for the delta between the reported number on shipments. And our depletion consumption numbers is that a very, very large it's not the largest retail customer of ours, decided to change its whole policy with regards to spirits inventories.
So that ended up in destocking across
the industry and it also impacted us
Okay.
And do you do you believe this is all now?
Or That is over. On the other hand, though, I mean, we had a very weak, January, you know, Australia because of the fires. Nobody was in the mood for, celebrating, and you actually see that in the offtake data of all spirits as well as deer. Having said that, we're happy to see that actually we we returned to to solid growth in in the month of February.
With regards to the extra ordinary CapEx, basically, you know, there are, you know, 22 buckets. 1 is the ramp up of production capacity. And this is, you know, happening basically in, in a land that's in Mexico where, you know, due to the huge growth of the brand, you know, we're planning to step up in a mini full manner, our distilling capacity and warehousing capacity to make sure that we can, supply, you know, in the coming 5 7 years, the the the growth of the brand. Secondly, we are in sourcing the the ball thing of, you know, you may remember that the product was bottled, produced, and bottled in the plant of that has been sold in conjunction with the disposal of the the Sarasota brand.
Mhmm.
And thirdly, you know, we are, again, improving our stealing capabilities in Jamaica. So these are the 3 major project in supply chain. And then second, you know, class set of investment is more relating to, to brand houses and, and visit our centers, and in particular, you know, Espolonia Marnier, and, you know, and after all,
I have the 3 big ones.
Okay. Thank you very much. Question is from Andrea Pistacchi of Deutsche Bank. Please go ahead.
Yes. Hi. Paolo. Hi, Bob. I have a three questions, please.
The first one for Paulo. On what you said about, the margin. I think you mentioned a tariff impact of 1,000,000 and the NAGA impact for 2020 also of around €8,000,000. If I remember correctly, at the say you were suggesting €5,000,000 but for each. So I wanted wanted to know, please, what what may have changed there?
The second question, how do you think about the balance, the emerging markets on top line in 2020? To the main markets there. In the distribution business, that you're acquiring in France, so obviously some to the MP Trust, but there'll be a few things about this creation business. Would everything there be
for the foreseeable business of distribution, that distribution business will will remain. And once we've done that, I think, obviously, we'll start making some priorities, but for the foreseeable future, it will remain with us.
So, you know, with, with with regards to, to, you know, match, you know, changing guidance on the negative impact of Agar for 2020. There is, as I said, two factors here. A little bit, you know, higher average cost for, for 2019 that, you know, will, will impact, you know, the carrying amount of liquid sitting in, investment tanks. So you will have, you know, the delayed impact in 2020. And secondly, you know, we're starting, reducing, you know, the quantities of, of the liquid, you know, health as we're anticipating the change in price in the agave.
So basically, we believe it would be nice to reduce the stocks to make sure that, you know, as soon as the price starts falling, we can reap the benefits of the lower prices immediately as opposed to having huge amount of aging of liquid that is still the liquid that would bought at higher prices that would impact coming years. So that's the loss.
Okay. And on on the on the tariff?
Yeah, on the tariffs, you know, as far as, you know, it's, it it's an equation where you have, you know, 3 components on one end here as the increase of tariffs. That is clearly higher than the amount, you know, highlighted. There is, you know, the price increase that is aimed at offsetting a part of it. There is, you know, the change in import procedures as we're reducing the direct imports. To to minimize the impact.
And of course, you know, tied to this rights increase, there is a potential, you know, volume effect. That we're putting into the equation on a conservative basis. So, you know, we feel that, you know, this, you know, the 1,000,000 to 1,000,000 on 1,000,000 on, sorry, 1,000,000 on tariffs. So it's a fair assessment of impact of the 3 factors.
Thank you. And then my last one, please, on sort of top topline trends, main marketing, sort of qualitative terms, what we should expect what you'd expect for 2020? You wanted to confirm. Thank you.
Well, I mean, we we would expect, the Americas to grow mid single digit with that pretty much across the board with obviously, less of a growth in the sovereign cone and slightly higher in some of the other markets, but the U. S. Largest market, we would expect it to grow mid single digit including the any impact on Sky, from competition. Looking at to, North And Central, in Eastern Europe, we will see the same track record an improvement in Germany to mid single digits in most of the markets trending there. And pretty much the same in in semia where we would expect though to have a italy continue its current momentum and have the ability to absorb the tail end of the destocking in South Africa.
Whereas Asia should improve its performance. Having gone through the destocking in Australia, We need to understand though when we kick off with the JV in terms of trading terms, from a timing standpoint, because there are the Olympics coming, and it is, not necessarily proving easy to find logistics providers, till after the Olympics. So we'll have to see how that goes. And on China, there's incognito on the coronavirus.
The next question is from Sanjeet Alizla of Credit Suisse. Please go ahead.
Just three questions for Finley as well. Firstly, a clarification on
the margin, Pavel, I think you
One second, we've had the auto classic shutter is coming down here, and they're making a lot of noise, and we can't hear you.
Okay. Sure.
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a prison, but we hear you better.
Great. Okay. So just a, a clarification on the margin. I think Pamela walked through the, the building blocks or as to a flattish gross margin outlook for 2020. But was the implication also flattish on EBIT margin expansion, just wondering how you're thinking about A and P and structure cost development on an organic basis in 2020.
My my second question is on South Africa. I think a few years ago, you also went through a a a change in distribution. So what are you doing differently now? Why why they're destocking? And then my third question is is on the US depletion outlook.
I think you you suggested you've factored in a slower, depletion outlook on Aperol and Campari following the price increases and just wanted to get a bit more color on what sort of level of growth you're expecting out of those brands in the U. S?
I mean, in terms of South Africa, what we're doing is we're really trying to focus on what's called the main market, which are the townships and we're changing our distribution partner there. So there's clearly a stop changing hands, which are impacting shipments. On the other hand, with regards to the US depletion outlook, I I think what we're taking is a little bit of a cautious view on the price increases, but actually, if you look the fundamentals of the brand both Aperol and Campari are continuing to trend very well. So, well, I think we'll give a much better view on that. Once we have our Q1 behind us.
Yes, with regards to our full EBIT margin guidance, what we're seeing at the gross margin level. So, you know, flattish gross margin on sale. On sales, we expect that we'll be fully translated at the latter with, you know, flattish EBIT, with, you know, A and P and SG and A on sales, you know, broadly, you know, flattish you know, give and take that directionally, we would like to potentially, you know, reduce weight of SG and A in favor A and P, but, you know, it would be an a house, you know, minimal. So, you know, the at EBIT level, we we believe we'll end up with the fly fish, even on sales. But still, in value, we we're positive.
I mean, it's, you know, the the the branch momentum is good. And and we believe that that would, translating to healthy EBITDA growth in value.
Got it. And just a follow-up on Skye, are you are you seeing any impact on the brand from the growth in the hard seltzer category through the course of 2019?
No. Not really. We haven't seen it, impacting us.
And is it would you would you would you look to participate in that that category with with some sort of sky variant?
Something which we we might look into. But, I mean, frankly, we've seen a lot of these things come and go in the US over the years. So more than excited at this stage.
Okay. Thank you.
Mr. Country Countries, there are no questions registered at this time, sir.
Well, thank you very much for joining us, particularly at this hour. So have a nice evening and have a few Negroni. Thank you. Bye bye.
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