Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Campari Group 2018 Full Year 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 zero on their telephone. At this time, I would like to turn the conference over to Mr. Bob Kunze-Concewitz, Chief Executive Officer of the Campari Group. Please go ahead, sir.
Thank you very much. Good afternoon, and thank you for joining us on our call. Before we jump into the presentation, I'd like to apologize for my voice and the occasional cough. I should have listened to Paolo Marchesini, who says going to vacation is overrated and weakens the immune system. Anyhow, having said that, if you have the presentation in front of you can see on the summary chart on page three that the results for the full year 2018 are pretty strong with consistent and solid performance across all of our key underlying indicators. Looking into them in detail on page four, you can see that we have sustained organic growth, which has enabled us to both enhance our marginality as well as fuel further investments into the business for the future.
Focusing on net sales, positive organic growth up 5.3%, thanks to the continuous improvement in sales mix led by the consistent outperformance of our high-margin brands in core developed markets. Particularly, the global priorities continued to outperform, up 8.9%, driven by our aperitifs, Aperol, Campari, Carmagnola, as well as Brown Spirits. Our regional priorities were only up 2.8%. They were handicapped by mostly the Cinzano brand in Russia and Argentina, as well as a difficult comparison base overall. Clearly, our stars here, Espolòn, Forty Creek, Braulio, and Bulldog continue performing very nicely. Whilst local priorities were down 1.5%, and this is mostly due to a decline in the Brazilian brand, which were particularly hit in the first half of the year. It is important to look at it from a geography standpoint.
We've had solid growth, as I said earlier, in the high-margin developed markets, particularly North America, Western Europe, and Australia, but softness in lower margin emerging markets due to macro volatility as well as tough comparison bases. This has hit mostly Russia and Argentina. Focusing on Argentina, it is important to underline that our organic growth, so the 5.3%, excludes the positive pricing effect in Argentina, 30 basis points on a full year basis and 80 basis points in the last quarter of the year. On a reported basis, our net sales were down 2.4%, reflecting the negative perimeter effect of 3.4% or EUR 60.2 million, which is linked to the sale of the Lemonsoda business as well as the discontinuation of the Brown-Forman agency in Italy. The other hand, Forex was also quite negative, down 4.2% or EUR 73.5 million. Moving on to adjusted EBIT.
A very nice organic growth of 7.6%, nicely ahead of sales growth, generating a 50 basis points margin accretion. Again, here the story is the same. It's driven by gross margin expansion linked to our global priority brands, which overall our gross margin increased by 120 basis points. This despite some pretty adverse agave as well as sugar effects, which not only has a gross margin compensated for these effects, but they also offset some reinvestments in brand building behind key global brands as well as some selective strengthening of our on-premise capabilities. On a reported basis, our EBIT is flattish, down 0.4%, it takes into account the negative effects, obviously, of the disposals of 4.7% as well as Forex at 3.3%. Net profit on an adjusted basis came in at EUR 249.3 million, up 6.8%.
Group net profit on a reported basis is up EUR 296.3 million, down on a percentage basis of 16.8%. Free cash flow was quite robust, reaching EUR 235.6 million, of which recurring free cash flow reached EUR 267.7 million. On the basis of that, our net financial debt stood at the end of the year at EUR 846.3 million, which is down by a healthy EUR 135.3 million. This takes into consideration, obviously, also the proceeds of the Lemonsoda business, but also the acquisition of Bisquit, the dividend, and the net purchase of own shares. All in all, this leads us to a net debt to EBITDA pro forma ratio of 1.9 times. The board of director in closure will recommend keeping the full-year dividend in line with last year at EUR 0.05 per share unchanged. Moving on to page number five, I think this is clearly a view which is worth underlining.
You can see that we're consistently delivering on strategy, generating very positive margin momentum, thanks to the organic performance of our global priorities. We've seen in the past four years a steady and consistent strong gross margin expansion coming from the mix. If we look at it on a cumulative four-year basis, our gross margin was up 680 basis points, of which 390 organic. If we move on to EBIT, adjusted on a cumulative four-year basis, was up by 300 basis points, of which 130 basis organic. Net in net, quite solid results. I'm not going to spend much time on chart number six because we're going to go into the details of the regions as well as the brands. You can see that we're healthy growth across all of our regions, despite South America.
The Americas had nice growth, the only blip in terms of brand category was on the local priorities, driven by the performance of our Brazilian brands in the first half. Moving on to chart number eight, only worth underlining the fact that actually the euro strengthened against all our group currencies, that generated quite an important Forex negative effect of 4.2%, EUR 73.5 million. Moving on to chart number nine, what's worth underlining is the Americas are clearly our largest area, accounting for 43.5% of the total, this is led by the U.S., which has now reached 26% of the total. Southern Europe, Middle East, and Africa is our second region at 28% of the total, growing much faster than the markets in these areas. Italy is the leader here again with 20.8%.
Our third largest is North, Central, Eastern Europe, growing, again, outperforming the market benchmarks, growing by 6.2% and reaching 21% of the total. Last but not least, Asia, which had a pretty strong year, only 7.5% of the total, but growing very nicely at close to 13%. In terms of our balance between developed and emerging markets, it's roughly stable at 81% versus 19%. Focusing on the Americas, as we saw earlier, the Americas are organically growing 3.9%, but that's composed of North America, which is up the very nice 6.7%, whilst all the pain was in South America, which was down by 11.3%. In the U.S., we had a solid performance, up 4.5%, thanks to the continued outperformance of Espolòn, Aperol, which is becoming significant in that market, and Campari. All these three brands growing at quite a sustained double-digit rate.
Added to that, we also have a very nice contribution from Wild Turkey, Grand Marnier, and the Jamaican rums. All of this together was enough to offset the decline in the SKYY portfolio. I mean, SKYY was down 11%. As you know, the brand continues to be affected by the de-stocking exercises, which we kicked off last year and which will probably last till mid of this year, Q2, Q3. Jamaica, on the other hand, is growing from strength to strength. Large market for us, up double digits, 14.4%. What's very positive here is the mix, because clearly all of our high-margin brands are performing double digits, like Overproof, up 14%, Campari 28.7%, Appleton Estate 22.4%, and Magnum Tonic Wine 20.4%, so a very nice performance. The other markets in Northern America were up 10.5%, Canada up 4.1%, driven by Little Suspects.
Mexico, for here in the run, the fastest-growing spirits company in the market, up 16.1%, largely driven by SKYY Ready-to-Drink, but also again here, Aperol is becoming an interesting factor. Moving on to South America, which is down by 11.3%. Brazil had a better second half, so was down only 2.8%. Clearly here, the political instability and the macro issues in the unemployment rate hurt us over the year. At the same time, we're also transitioning from a business model based on local brands to higher-margin imported brands, and we start seeing that volumes are coming down, but profitability is improving, and we have brands such as Campari and Aperol doing extremely well in that market. Argentina, and this is where we had the most pain, down 32.4%. This full-year number actually incorporates a 47% decline in volume in Q4.
As you know, given the situation, we chose to apply very strict credit policy, this clearly impacted our selling in the highest seasonality of the year. Having said that, we feel better about the business going forward this year. Last but not least, the rest of the region, up a very solid 29.7%, we're particularly pleased by the performance of Peru, which was up 41.8%. You recall, Peru is our latest new subsidiary. Again, here, key drivers are amongst all the Aperol brand. Southern Europe, Middle East, and Africa, up 4.9%. Clearly, this is the region most impacted by the perimeter because both Lemonsoda, to a large extent, and the Brown-Forman agency business were concentrated in Italy. Italy, on an organic basis, had a very strong year, up 3.6%. Given the scale of our business in that, this is a very nice performance.
Clearly led by the double-digit growth of Aperol, up 15.3%. This has been now 15 years in a row that we've been growing the brand at double digits. Added to that, solid growth of Campari at 7%, and then nice performances as well behind Braulio, Espolòn, and SKYY. These all together helped offset some softness in the small size aperitifs Campari Soda and Crodino, as well as the lower margin Cinzano sparkling wines business. Rest of the region was up a very nice 9.4%, France continuing to grow steadily at 10%. Here, the key hero is Aperol, but as well as Riccadonna, Campari, and Bulldog. Spain also had a nice growth, 6.7% considering that the market was in dire straits last year. Behind the usual suspects, Aperol, Campari, as well as SKYY.
In the African market, very positive development in Nigeria, thanks to our premium Campari and SKYY and American Honey brands, up 54.4%. South Africa, on the other side, was penalized by the comp base from the previous year when we set up our organization in 2017, but it should return to normal trading this year. Travel retail, which belongs to this region, up a very healthy 10.2%. Very nice performances of Aperol, Wild Turkey, Grand Marnier, Appleton Estate, and Bulldog. Moving on to North, Central, and Eastern Europe, up a very healthy 6.2%. Our largest market in that area, Germany, up 6.5%. Very satisfactory results. Double-digit growth on Aperol, up 22.6%. Campari returning to a nice growth, up 13.9%. Also nice beginnings on the Bulldog and Grand Marnier brands.
All of these put together more than offset some short-term issues we've had in Ouzo 12 at the end of the year, as well as the price repositioning on Averna and the transition of Glen Grant to more aged variants. U.K. continuing to perform very strongly, double digit, up 19.1%, with nice double-digit growth across all brands. Aperol up 56%, Campari 39, Bulldog 25, Appleton 25, and Wray & Nephew Overproof 13%. Russia, on the other hand, was down 11.4%, partially that is due to market volatility as well as a very unfavorable comp base. In 2017, the market was up 40.6%. What we're also seeing in this market is that mainstream brands catering to the lower middle classes are the ones hurting the most, so that impacts the Cinzano brand.
Other hand, those brands catering to the higher middle classes are doing very nicely, as we can see behind the growth of the Mondoro Sparkling premium sparkling wine range, and very strong double-digit growth both in Campari and Aperol. Rest of the area also had a solid growth, up 13%, and very nice results in each one of our markets with the aperitifs again playing a significant role. Closing up the regions with Asia Pac, we're up 12.9% organically. This is one of the regions which was most impacted by Forex. The Forex impact was a negative 7.2%. Australia had a very strong year, grew 10.5%, and we practically outperformed in every single category in the marketplace.
Wild Turkey Bourbon gave us a lot of satisfaction, and the introduction of the new quite premium extension, Longbranch, was very well received by the market, and we're continuing to build the Espolòn, Glen Grant, SKYY, and Campari brands. Aperol, on the other hand, again, has had a fantastic year in Australia, up 38.8%. The rest of the region was also quite strong, up 18.8%. Nice solid growth in Japan, up 22%. SKYY RTD, Wild Turkey Bourbon, and the Cinzano portfolio helped there. We returned to nice growth in China as well, 23.4%, as well as in New Zealand. Moving on to chart number 15, the only thing worth underlining is that our global priorities now account for 56% of the total. That's a significant 400 basis points growth versus fiscal year 2017. One key reason for that growth can be seen on chart number 16.
There are highlights of the top 10 cocktails invigoration by the Drinks International Magazine, and you can see that our global priority brands all stack up very neatly against all these key cocktails. Most importantly, we have two which are proprietary. One is the Negroni and the other one is the Aperol Spritz. With the Spritz, the Aperol Spritz making it for the first time in the top 10, coming in at number nine. It'll be exciting to see where it heads next year. Going into detail on the brands. Aperol, 15 years, growing very strong. We're continuing to build on the momentum from the previous years, and our growth model with the 3 stages is working very well. We're continuing to grow very solidly in our core established markets. As I said earlier, Italy was up 15.3%, Germany 22.6%. Austria and Switzerland also had double-digit growth.
All of those markets entering into the 3rd stage of growth, which sees consumption linked to meal occasions, are seeing very nice results. The high-potential markets are doing very nicely, growing at an even higher rate. The U.S., which has become the third market in value terms of the brand, was up close to 74%. Clearly, our experiential marketing activations, which were focused on the East and West coasts, have worked quite nicely, and we will be looking forward to significantly dialing up the volume on that this year. The U.K., we saw earlier, up 56%. Russia, also double digits, reaching the Millionaire's Club. The same can be said for France and Spain, as well as global travel retail. On the seeding markets, if we look at the Netherlands, Canada, Czech Republic, et cetera, even in South America, we're growing at very strong, sustained double-digit growth rates.
The key reason for that is also the growth model, but particularly the type of marketing we do, which is all based on experiential marketing activations in the right places of consumption, working on de-seasonalization, as well as new locations. Our activities or our events can run from a dozen people to actually up to 70,000 people. We've developed quite a sophisticated model here, which is working very nicely across markets. Moving on to page number 19 on Campari. Excuse me. Campari, 10% of our sales, up to 5.1%, when clearly the Campari trajectory was heavily impacted by Argentina, which used to be the second-largest market, because if we exclude Argentina, the brand would have been growing at a double-digit growth rate, at 11.7%. We feel quite good about Campari. In EMEA, Italy growing nicely, 7.4%. Double digits in France. High single digits in Spain.
North, Central, and Eastern Europe, the German result is very encouraging, as well as what we're seeing in other key markets such as the U.K. and in Russia. In the Americas, the U.S., which is clearly the second-largest market by value of the brand, growing by 27.1%, as we're continuing to benefit from our classic cocktails, the Negroni, Americano, and Boulevardier in mixology outlets and speakeasy-style outlets. This momentum will continue going forward. Argentina declined, as I said earlier, by very high double digits, and this impacted the overall trajectory of the brand. Whilst Brazil made a comeback in the second half and only turned into positive growth of a low single-digit growth. Whereas Jamaica and Canada continue growing strongly, double-digit. Double digits also in Australia, whilst Japan declined on a shipment basis, but did better on a depletion basis. Marketing-wise, we're really focusing on two platforms.
One is cinema, both through our own short films as well as sponsoring festivals such as the Venice Film Festival. More importantly is the Negroni Week, which every year goes from strength to strength. Last year, we were very active in 10,000 bars in 69 countries, we'll definitely be raising the bar on that this year going forward. Moving on to SKYY, this is the only blemish on our track record. 9% of group sales, down 8.1%. Clearly, the key mover here is the U.S., where we were down by 8% in the fourth quarter as we're de-stocking the brand. In the U.S., we had a low double-digit decline overall, 11% on the year, and this compares with depletions being down 5%, whereas the Nielsen were down in the low single digit, and the NABCA were actually up in the low single digits.
There's quite a difference between consumption, depletion, as well as shipments. As I said earlier, we will be driving the de-stocking at least for the first six months of this year. What's giving us satisfaction is the brand, and particularly the marketing funnel, is reacting very well to the Proudly American marketing campaign, which we introduced in the middle of the year and will continue along that path. International markets, strangely enough, we did very well in Argentina. Continued growing nicely in Mexico. In Brazil, on the other hand, we were pretty soft. EMEA, Italy was flattish. Well, helped offset the flattish performance in South Africa. North, Central, and Eastern Europe, nice growth in the U.K., which helped mitigate weakness in Germany, where some of our peers are being very active on the promotion front.
Asia Pac, with China being the third-largest market, and Australia one of the top 10. Nice double-digit growth rates. On the following page, you can see some of the imagery from the very bold campaign which we launched, and which seems to be resonating across the spectrum of consumers, particularly with millennials. Moving on to Wild Turkey, 8% of group sales, up 7%, very nice, healthy, and steady growth rate. Wild Turkey Bourbon grew organically 8.4%, and Russell's Reserve continued its very solid track. American Honey did well in the U.S., but was temporarily weak in Australia, and that drove its overall growth to around 4%. In the U.S., the brand is reacting very positively to our marketing support built around the cooperation with the actor Matthew McConaughey, and particularly the release of the Wild Turkey Longbranch, which was developed with Matthew, was very positive.
As well as the acceptance of our high-end extensions such as Master's Keep Revival. Net, the brand is on a good path. That is also spinning over into Canada, which has been growing double digit. Asia Pacific Australia had a very strong year. As you know, Wild Turkey Bourbon and RTD represent about two-thirds of our sales in that market. We were up 13% and did also nicely in Japan as well as in New Zealand. In the rest of the world, excuse me, we're very positive momentum growing double digit, but obviously coming from a very small basis. The premiumization of Wild Turkey can be very nicely seen on page number 24, and we'll continue doing that. Moving on to Grand Marnier, our last acquisition. Hard to believe that's almost three years now. On page 25, 8% of group sales. Nice growth of 5.2%.
This bearing in mind that we've had the tail end of discontinuations of Cordon Rouge as well as Cherry and Peach Raspberry. Cordon Rouge, the core brand, is doing quite nicely. In the core U.S. market, we're up 6.1%. In Canada, on the other hand, we had a weak Q4 because we took a significant price increase to bring the brand, particularly in Quebec, to the price level it deserves. All the rest of the globe has grown pretty nicely. Again, the strategy is working, but we're coming off a very low base. What's driving the growth of the brand is the Live Grand strategy. That platform with very clear drinking strategy and very premium imagery across all of the touchpoints are making a difference, and we'll consistently drive this forward. To close off our global priority brands, the Rums also did nicely. The Jamaican Rums up 8.3%.
Here, we have a very nice performance both on Wray & Nephew Overproof as well as Appleton Estate. We had a little bit of a damper on the mainstream mixing rums, but those will be relaunched during the year, and we expect to recover some gains there. Overproof was up 12.3%, a very strong Q4. It's really turning not only a Jamaican favorite, but also of mixologists outside of Jamaica, particularly in the U.S. and the U.K. Appleton Estate is continuing to premiumize its offerings. If you go to the following page, you can see the 30-year-old and the 15-year-old. That's doing the brand a lot of good. As you can expect, those are also very heavy cases, so they're helping the bottom line. In Latin America, they're performing very nicely. In the rest of the world, we're growing at a double digit rate.
Obviously coming from a low base. Moving on to chart number 29, Espolòn. Espolòn, very fastly growing, up 26.1%, and it's growing at an even higher rate in non-traditional tequila markets, in Italy, in Russia, and many other places. We're feeling very good about this brand. Bulldog, despite some slowdown in the first two markets which launched it, which were Spain and Belgium, grew by 7.2%. We launched a new campaign in the last quarter, and we started seeing the brand react to that also in Spain and Belgium, so we feel good. Glen Grant, on the other hand, as I said earlier, is in transition. We're moving from unaged to an aged range, which means that we've put the unaged, which is the bulk of the volume, on allocation, and we're slowly reducing that and gaining on the value side of the equation.
Forty Creek did nicely in Canada. Canada is driving most of that with an 8.5% growth, with the brand reacting very nicely to the repackaging and the repositioning, which we introduced last year. Moving on to the Amari. The Amaris were softish. There were some specific issues, either product allocation on Braulio or Averna taking important price increases, most notably in Germany. Moving on to Sparkling Wines and Vermouth. Here you can see the two different tales. Mainstream brand Cinzano going through a tough period in Russia, mostly, as well as in Italy on the sparkling wine, whereas the more premium Mondoro and Riccadonna brands are growing in the high single digit, up 9.2%. To close it off with our local priorities, Campari Soda, flattish, although we see the brand improving from quarter to quarter, so we'd expect it to be in the low single digits this year.
Crodino, on the other hand, was down 2.9%. Here there's the comp base of the innovation of two years ago. We will relaunch the brand this year behind a more adult-focused strategy and expect it to return to better pastures. What's also interesting about this brand is it's starting to become a sizable business in Belgium, Switzerland, and the Netherlands, where we're gaining experiences for international expansion into other markets in years to come. The Wild Turkey RTD was up 5.6%, clearly outperforming the Australian RTD market, particularly the bourbon one, where we're growing twice as fast and doing the right things. The Brazilian brands were down 6.2%. We'd expect them to go flattish this year as we cycle through some of the transitions we had last year. Ouzo, the number doesn't reflect the intrinsic performance of the brand.
The brand is performing much more in Germany, which is the largest market, in mid-positives, mid-single digits. A very large customer canceled at the last minute the promotion in Q4, so that moved into Q1. It's more of a phasing effect. The same can be said on our shipments behind the Cavallero brand, as its consumption indicators are healthy. This is it on the brand side, and now I pass it on to Pao.
Thank you, Bob. If you follow me to page 33, we have the segment analysis. The Americas region remained the group's largest region in terms of net sales and profitability, accounting for 43.5% of group net sales and 42.6% of group EBIT. That, notwithstanding the decline in South American markets, as well as the negative FX effect which hit the region, and notwithstanding the outperformance of the high margin North and Central European region. Moving on to page 34, we have the analysis of the largest region, Americas. Topline grew by 3.9% in existing business, and EBIT was up by 3.7%, broadly in line with sales. Thanks to positive growth across the high margin North American region, more than offsetting weakness in the South America region, namely Argentina and Brazil.
Gross profit grew ahead of top line, leading to 60 basis point margin accretion, thanks to positive sales mix by brand and market, driven by high margin global priority brands in North America, namely Aperol, Grand Marnier, and Wild Turkey, and despite SKYY's negative performance. Further helped by the counterdilutive effect of the negative performance of lower margin Latin American markets. This positive sales mix improvement helped overcome the adverse effect of both the agave purchase price, which became progressively more impactful in the last part of the year, as well as the losses in the sugar business. A&P was up by 3.8% in value, almost in line with top line in existing business, with particular focus on global priorities, Grand Marnier, Aperol, Wild Turkey, and SKYY as well as the selective regional priority brands, namely Espolón.
SG&A increased in value by 7.5% in existing business, driving 60 basis points dilution on EBIT margin. This was primarily due to the strengthening of on-premise capabilities in certain North American markets. We then had a negative FX effect, largely driven by the strengthening of the Euro versus the Latin American currencies and some negative perimeter effect in the region, reflecting the disposal of the Carolans brand. EBIT in the region came in at EUR 161.5 million at 21.7% on sales, with a dilution of 10 basis points on net sales on a reported basis, totally attributable to FX and perimeter. If you move on to page 35, we have the analysis of the EMEA performance.
Net sales were up 4.9% in existing business. EBIT was down 5.6%, still in existing business, driving 10 basis points accretion on the back of the key Italian market and sustained growth in the rest of the region. In particular, we had positive performances in France, Spain, as well as in the duty-free channel. Gross profit grew by 8% in value, driving 170 basis point margin expansion, driven by solid performance of high margin aperitifs portfolio, in particular Aperol and Campari. A&P was up 12.6% in value, well above the top-line growth, driving 110 basis points dilution on EBIT. The A&P step-up was driven by brand building investments behind, again, the aperitifs portfolio across Europe as a whole and high potential market, as well as some selective regional priority brands in the global travel retail chain.
SG&A were up in value by 7.1%, driving 50 basis points dilution on the back of the strengthening of on-premise capabilities in certain selected markets. FX impact in the region was negligible, whilst the negative perimeter effect was attributable to the disposal of low margin non-core businesses, as well as the termination of agency brand distribution, particularly in the Italian market. EBIT came in at EUR 83.6 million, up to 17.4% on sales, 20 basis points accretion on a reported basis. If you move on to page 36, we have Northern and Central European and Eastern European market. Net sales were up 6.2%. EBIT was up 12.1% in value, well ahead of sales growth with 170 basis points accretion, driven by strong performance of aperitifs, again, also in this region across whole markets. Gross profit was up 10.9%, leading to 260 basis point EBIT margin expansion.
Also here we had very strong sales mix improvement led by the positive performance of high-margin aperitif portfolio, in particular Aperol, which grew by double-digit in core high-margin markets, namely Germany, the U.K., and Austria. A&P was up 11.3% in value, driving 60 basis point dilution. We stepped up A&P spend, particularly on the aperitif portfolio. The SG&A were up 8.1% in value, driving 30 basis points dilution, reflecting the enhancement of our on-premise capabilities in certain high-potential markets. Also in this region, we have a negative FX, particularly attributable to the valuation of the Russian ruble, as well as the negative perimeter driven by the termination of some agency branch distribution. EBIT came in at EUR 115.1 million, up to 32.1% on sales or 120 basis points over prior year. Page 37, we have APAC.
Top line in existing business was up 12.9%, Bottom line was up 29.4%, driving in existing business 190 basis points accretion, thanks to positive results across the whole region, but in particular to the Australian market. Gross profit was up 12.7%, broadly in line with the top line. No accretion impact in this region at the level of gross margin. A&P grew slightly below top line, rising just 20 basis points, although steering value was up 11.4% in 2018. The SG&A grew at a very moderate pace, 2.4% in value, thus leading to 190 basis point EBIT margin expansion, driven by cost containment programs and positive operational leverage. Negative FX effect largely driven by the weakening of the Australian dollar versus the euro, and in this region, the perimeter impact was almost negligible.
EBIT came in at EUR 18.7 million, up to 14.5% on sales, or 120 basis points over prior year. We skip a few slides and move to page 40, where we have in summary the key highlights on EBIT adjusted performance. Gross profit on a reported basis was up 1.6% in value to 60.1% on net sales, showing 230 basis points gross profit expansion. In existing business, gross profit grew by 7.5% in value, as you saw before, showing 120 basis point margin expansion. Here we reiterate the favorable sales mix by brand and market with the outperformance of key high-margin global regional priorities in key developed markets. Those positive effects have overcome the adverse effect of both the agave purchase price, progressively more impactful in the last part of the year, and on the other end, the losses in the sugar business.
Forex and perimeter in aggregate had a negative impact on the gross profit of 5.9% in value, on the other end, drove 110 basis point margin expansion on the back of the disposal of low-margin businesses and the termination of certain distribution agreement. The A&P on a reported basis was up 3.3% in value to 16.9% mark, showing 90 basis points dilution on a reported basis. In existing business, A&P has been stepped up by 7.8% in value, leading to 40 basis point margin dilution and reflecting higher marketing investments in brand building initiatives, in particular behind the brands Campari, Aperol, SKYY, Wild Turkey, and Grand Marnier. Forex and perimeter combined effect of a negative 45% in value and 50 basis points margin dilution.
The SG&A on a reported basis were up 2.3% in value to the level of 21% of net sales, leading to 100 basis points dilution on a reported basis. Whilst in existing business, the SG&A were up 7.1% in value higher than the top line, leading to just 30 basis points margin dilution. That was due to selective strengthening of both group on-premise capabilities as well as investments in the duty-free channel. Forex and perimeter combined effect of a negative 4.8% in value and 70 basis points margin dilution was clearly driven by the deconsolidation of disposed businesses which were carrying no structural costs. EBIT adjusted on a reported basis was down 0.4% in value, with 40 basis points accretion on a reported basis. In existing business, as we saw before, the value growth of EBIT was 7.6% and we achieved 50 basis point EBIT margin expansion.
On the other end, Forex and perimeter combined effect was even bigger than the organic growth of EBIT at 8% in value and driving 10 basis points margin dilution. If you follow me to page 41, we can see visually the key drivers of the achievement of the reported EBIT. Adjusted, it came in at EUR 378.8 million, down 0.4% at 32.1% margin on sales with 40 basis points accretion. Most notably, as you can see below, against all odds, in agave and sugar. For the second year in a row, the group managed to achieve a 120 basis point gross margin expansion and 50 basis point EBIT margin expansion, notwithstanding higher investments in A&P, which costed 40 basis points margin dilution and strong investments in our sales infrastructures costing a further 30 basis points. Most importantly, again, looking at the EBIT adjusted organic performance.
In 2018, the group delivered a very healthy 7.6% after a very healthy 8.7% delivered in 2017. FX, negative 3.3% in value, EUR 12.6 million hit at the level of the EBIT and perimeter 4.7%, so that EUR 18 million hit at the level of the EBIT. Moving on to page 42, financial charges. They came in at EUR 33.8 million, down 6.3%, thanks to a reduction of the average indebtedness, which came down from EUR 1,144 million to EUR 925 million. The average cost of net debt came in at 3.3%, up from 2.9% of last year, reflecting the negative carry effect on excess cash, which is huge at the moment, is north of EUR 600 million.
Positive financial adjustments of EUR 1.8 million, primarily related to some minor financial asset sale versus a EUR 24.8 million cost in 2017, attributable to one-off liability management transaction in April of last year, which helped contain the cost of net debt in 2018. Page 43, the analysis of group net profit reported. Bottom line, the group net profit came in at EUR 296.3 million, down 16.8%, but that was due to reduced adjustments versus prior year. In the following slide, we'll see the recurring performance of the adjusted and recurring EBIT. The decline in net profit reported was attributable to lower positive operating adjustments. In 2018, we had a positive EUR 1.9 million attributable to the gain under the Lemonsoda business disposal, net of partially compensated by the provisioning for restructuring initiatives.
Last year, in 2017, we achieved a gain of EUR 13.9 million, which again, was attributable to another disposal, the Carolans one, with a capital gain of EUR 49.7 million, partially offset again by the provisioning for other restructuring initiatives. We had a positive impact from financial adjustments of EUR 1.8 million, mainly related to some minor financial asset sales versus a negative EUR 24.8 million attributable to one-off liability management transactions. Negative impact from higher total taxes, EUR 54.5 million this year versus a positive EUR 29.7 million of prior year, attributable to both the one-off adjustments related to the US tax reform in 2017, as well as the cumulative effect of the patent box tax relief in Italy.
Looking forward into 2019, we highlight overall net positive adjustments, accounting for EUR 14 million, derived from the patent box tax relief in Italy, which is in its fifth and final year, 2019, and which is assumed to be in line with 2018 at the EUR 26 million mark, which that positive will more than offset provisions for the completion of certain organizational projects that were launched in 2018, totaling EUR 16 million. We have clearly to factor in the corresponding fiscal effect on those costs, which accounts for about EUR 4 million positive. Page 44, we have the group net profit adjusted and EPS. This is the recurring one.
Group net profit, on the contrary, was up by 6.8%, achieving EUR 249.3 million on the back of decrease in recurring net financial charges by EUR 6.3 million, EUR 33.8 million this year versus EUR 14 million of last year. Reduction in put option cost and others accounting for a delta of EUR 4.9 million, positive EUR 2.1 million this year, negative EUR 2.8 million last year. A reduction in total recurring taxes of EUR 6.4 million. Worth highlighting on the tax side, the recurring cash tax rate down from 23.7% to 23.4%, and recurring effective tax rate down from 30.9% to 28.2%. Page 46, we have the analysis of free cash flow. As you can see, we show here both the reported cash flow to the left-hand side, as well as the recurring.
The free cash flow stated came in at EUR 235.6 million, up EUR 8.5 million versus the prior year, whilst the recurring free cash flow came in at EUR 260.7 million, up EUR 18 million over prior year. We had a slight decrease of EBITDA adjusted of about EUR 5 million, totally attributable to perimeter and FX. Focusing on recurring items, we had recurring taxes at EUR 72.5 million with a difference versus 2017, which was impacted by phasing of tax payments. Operating working capital change lower versus last year, EUR 25.5 million versus EUR 58.6 million, and recurring financial expenses of EUR 22.8 million, lower than prior year at EUR 27 million. Maintenance CapEx at about EUR 50 million, EUR 49.7 million. Overall CapEx, EUR 70.9 million. A negative impact from other non-cash items of EUR 31 million on reported, and on the recurring side, a positive amount of EUR 5.6 million. Very healthy cash conversion.
Recurring free cash flow on a EBITDA ratio at 61.9%, almost 62, from 57% of last year. If you move on to page 47, we have the analysis of working capital. Working capital came in at EUR 636 million, as a percentage of sales, 37.2%, up from 33.3% due to perimeter. As we can see up there, the first-time consolidation of Bisquit drove 330 basis point dilution in operating working capital as a percentage of sales. In existing business, organic increase of operating working capital was contained at EUR 25.5 million, with a 30 basis point reduction on operating working capital on net sales, thanks to operating working capital containment initiatives in existing business. We then had EUR 9.9 million of forex impact, positive, and a negative impact of EUR 36.7 million from payments. Page 48, CapEx, no major change 2018 versus 2019.
2018 total spend EUR 70.9 million, including real estate disposal of EUR 4.4 million, of which maintenance CapEx accounted for EUR 49.7 million, and extraordinary CapEx EUR 25 million-EUR 26 million. For this year, we're envisaging a CapEx spend of about EUR 78 million, of which 54 in maintenance CapEx, and further EUR 24 million in extraordinary CapEx, primarily attributable to investments in brand houses to build the Campari, the Grand Marnier brand, and other brands, and few other minor. Page 49, we have the net financial debt analysis. Overall decrease of EUR 135 million. We have totally analyzed the free cash flow generation of EUR 235 million. The net impact of acquisition of disposal was a positive EUR 22 million. Dividend paid, EUR 57 million. Buyback of own shares by EUR 55.5 million. Minor adjustments accounting for EUR 9.5 million, land at EUR 846.3 million, with a net debt to EBITDA pro forma ratio of 1.5%. Debt maturity, no major change.
As highlighted, the group is totally hedged vis-a-vis the repayment of the outstanding short-term maturities, with a EUR 632 million excess cash, and the bulk of the long-term debt currently paying fixed interest rate at 2.03%. Page 51. Very quickly, as you all know, there is the introduction of the new IFRS rule for what concern lease recognition, which is all about the remeasurement of all material lease contract that they have to be recognized on the balance sheet. Basically, in a nutshell, rent expenses will be replaced by depreciation. As you can see below, we have a positive impact on the EBITDA adjustment of EUR 15.9 million due to rent expenses that have been substituted by incremental depreciations that you can see below at EUR 13.5 million, with a net positive impact on the EBIT adjusted of EUR 2.4 million. This is the picture based on 2018 numbers.
On 2018 numbers, we would have recognized the net financial charges for EUR 3.1 million, and then at the bottom of the page, you see the impact on net financial debt, that is a negative EUR 83.3 million. On a reclassified basis, the net financial debt would move from EUR 846 million to EUR 929.6 million. I think this is it on numbers. Back on to you on the outlook, Bob.
Thank you, Paolo. Before opening to your questions, just to recap, the year 2018 is amply demonstrated by this presentation. We had very constant delivery on strategy, with a very solid organic performance across all of our key profit indicators. Robust organic top line with continuous sales mix improvement, driven by the fourth year in a row, continued outperformance of our key high margin brand in core developed markets. On the other hand, on a reported basis, clearly the overall results reflected a pretty heavy negative Forex, as well as some perimeter effects. Looking forward to 2019, our outlook remains pretty balanced in terms of both risks and opportunities. We see the underlying business performance as continuing to keep its current momentum. We have very good momentum, and this despite uncertain macroeconomic scenarios as well as some continued volatility in some emerging markets.
We expect our key high margin combination of global and regional priorities in core developed markets to continue supporting the sales mix improvement, as well as organic gross margin expansion, so as to offset the negative agave effect, which will unfortunately remain at an elevated level this year due to the strong trend of the tequila category and some poor harvests by some of our peers in their own land, and they're moving on to the open market to purchase. In terms of the current underlying trend in EBIT, we expect our organic margin to continue expanding, and will be supported by gross margin accretion, even after investments into the business, particularly continuing on some selective on-premise capabilities as well as the new brand houses development.
Forex and perimeter effects, whilst driven by the continued volatility of some currencies as well as the tail end effect of the previous year's transactions, are clearly expected to be less adverse than previous year. Net profit is expected to benefit from net positive adjustments driven by the patent box tax relief in Italy, which will be running out as it's its fifth and final year. Net in net, we remain pretty confident in delivering a positive performance across all of our key underlying business indicators in 2019, as we did in 2018. Looking forward to your questions at this stage.
Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephones. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. The first question comes from Mr. Edward Mundy of Jefferies. Please go ahead, sir.
Afternoon, Bob. Afternoon, Paolo. Two questions, please. The first is on slide 16, where you show the top 10 cocktails of 2019. I think what's quite interesting is that very similar cocktails to let's say 10 years ago, I think the Mojito is out, Espresso Martini is in, Hendrick's out, Aperol Spritz is in. Where do you think we are in the Aperol Spritz cycle? Do you think this is a drink that's got longevity for 10 years or so? How do you feel about the current momentum of high 20s being sustained rather than the 2016 or 2017 high teens growth? The first question. The second question, obviously Paolo, could you perhaps run through some of the key moving parts around margins for 2019? The third question is around M&A and the M&A pipeline. Are we any hotter or colder than usual?
Let me take the first and the third question, Ed. Good afternoon. We feel pretty good about Aperol Spritz and its momentum. Frankly, the growth model is really validating itself in all of the markets. In the first stage, it's really about penetration in the spring, summer, then we de-seasonalize it, and finally we move into other usage occasions. When we see Italy growing by 15% in its 15th year, that is clear testimony to the legs of this brand. The key reason for that is that the source of business for Aperol and the Aperol Spritz isn't other spirits. It is a huge source of business, which is mostly beer and then some wine and some sparkling wine. We feel very confident about the momentum of the brand going forward.
On the M&A pipeline, there's always a pipeline, but we've turned more selective over the years, so we'll see what happens.
Hi, Ed. With regards to the margin guidance for 2019, after a couple of years of steady and consistent growth of the EBIT margin expansion at 50 basis points, which was clearly driven by gross margin expansion, which in both consecutive years accounted for 120 basis point. That clearly helped expand the EBIT progression in value terms from mid-single digit that is in our top line into high single digit, 7.6% and 8.7% respectively in 2018 and 2017. For 2019, we feel confident vis-à-vis the EBIT margin expansion that we can achieve. With regards to the key drivers of the EBIT margin expansion, we still believe that gross margin expansion is the way to go, and we feel confident also vis-à-vis 2019.
Part probably of the achievement will be, if target is achieved and exceeded, reinvested into minor step up in A&P as we did last year on the back of better than expected negative FX impact. With regards to retrospectively looking into 2018, clearly we've guided the market for a 60 basis points margin expansion, then we landed at 120 basis points. Clearly, it's a combination of factors. On one end, certain high-margin brands and high-margin markets performed better than expected. On the other end, we also have to recognize that part of the gross margin expansion was achieved on the back of the decline of certain emerging markets, namely South America, Brazil, and Argentina, which, by the way, compromised to a certain extent or had a negative impact on the top line performance in 2018. The magnitude of this can be seen in about 30 basis points.
You should read the 120 basis points achieved this year as potentially 90 basis points. We all know that there is a 60 basis points negative hit from agave in 2018. In 2019, we were hoping that agave could decline faster. On the contrary, due to the very strong performance of tequila in the U.S. market, there is still an imbalance between supply and demand. Potentially, the change in direction in the aggregate price is expected to occur potentially later than envisaged. Overall, we feel that if we combine all these things together, we feel pretty confident to achieve a very nice gross margin expansion.
Great. Thank you. Bob, just coming back to Aperol again, I don't know whether at this stage you're able to comment on whether you think the growth is going to be more like the 2016 or 2017 high teens growth or more like the 2018 growth, which clearly accelerated more towards the high twenties level in light of the continued success in Italy, continued roll out a number of markets and sort of momentum you're seeing in the U.S. as well, which feels like it's just getting started.
Well, the brand is building momentum, as I said, we'll see where it goes. I mean, the model is working, it's working everywhere. We feel very good about it.
Great. Thank you.
The next question is from Mr. Andrea Pistacchi of Deutsche Bank. Please go ahead, sir.
Yes. Hi, Bob. Hi, Paolo. I have three questions, please. The first one is on your SG&A reinvestment. You've been stepping up on trade capabilities in a number of your markets now for some years, and you're flagging reinvestment also this year. Where do you think you are in the process of really stepping up this route to market? Whether we should think of it as an ongoing process as you continue to grow the top line for the next few years. Second question is on your tax rate. Actually, last year, I think you said that the U.S. tax reform would become more meaningful in 2019. Wondering whether this is still the case and if you could give any indication about your tax rate for this year, please.
The third question is generally a bit of an outlook on your emerging markets, which held back growth in 2018. A lot of this is macro. Some of this, I believe, is also because of the nature of your portfolio, which is skewed to local brands. What do you expect for these markets, mainly Argentina, Russia, and Brazil, in 2019?
Okay. Let me take the first one. I think, what we're talking about here in terms of our SG&A buildup is really fine-tuning as we go ahead. If we look at this year, probably the bulk of it is going to go behind important brand ambassadors and educators for our aperitifs and particularly Aperol in Asia. We're seeing the brand also attracting attention in key Asian cities. We're looking forward to developing the future growth of the brand because frankly, it's really nowhere there at this stage except for a few key bars and key hotels. We know how big a beer market it is. At the same time, we're seeing a lot of Asian tourists, and particularly Chinese, drinking a lot of Aperol Spritzes in Italy. We're starting to build that.
The other part is some sort of one-off on brand houses, as we start to reinforce, if you want, the foundations of some of our brands. We've done it with Wild Turkey, we've done it with Glen Grant, we've done it with Appleton Estate. This year's the turn of the Campari and potentially something on Aperol. I would say it's a mixed bag, but it is clearly us responding to opportunities as we see them show up.
With regards to the tax rate, Andrea, yes, you're correct. We're expecting further, all being equal, the sales mix, further reduction in the recurring cash tax rate driven by the U.S. tax reform. The magnitude could be in the region of 50 to 60 basis points. All being equal, because we have also to assess what is the impact of the reforms that our government is introducing in Italy, in the domestic market.
The storytelling is a reduction in the corporate tax rate to be seen. I'm more skeptical around the possibility of containing the effective tax rate in this country. We'll see.
Lastly, on energy market outlook, please.
Well, if you look at it, what really hurt us last year were two areas. One was Russia, and the other was mostly Argentina. I think we would see Russia returning to nice growth this year, particularly driven by the aperitifs, as you said earlier, Campari and Aperol, which is very beneficial to the mix. On Argentina, I think we're cautious still at this stage, where we'd expect it to be flattish, whereas Brazil should return to nice growth, somewhere between mid to high single digit. The rest of emerging markets continuing along their current path.
Thanks very much.
Thank you.
The next question is from Trevor Stirling of Bernstein. Please go ahead, sir.
Hi, Bob and Paolo. Just one question from my side, gentlemen. In Q4, there was quite a deceleration in virtually every region, and there'll be quite a few tough comps in there and phasing of shipments. Is there anything else there apart from those quarterly effects that you'd like to mention?
No, in terms of consumption, we actually had, with the exception of SKYY Vodka in the U.S., very good consumption indicators. We feel comfortable about that.
Very good. Thank you both.
Sure.
The next question is from Emma Letheren of RBC. Please go ahead, ma'am.
Hi. I just wanted to ask a bit more about Q4, the moving parts of what grew that slowed down that growth. I think you talked about Russia, and Argentina being particularly weak there.
The biggest, if you want decelerator in Q4, was our performance in Argentina, where we were down on volume basis by 47%. Had Argentina gone through a normal path, if we hadn't put in the very strict credit policies, we would have added quite a bit of lift to our top-line growth.
Okay. Thank you.
The next question is from Marion Cohet-Boucheron of MainFirst. Please go ahead, madam.
Hi, everyone. Just two questions, please, for me. One on the A&P ratio. How do you see it evolving going forward? Should we expect it to continue to go up as higher intensive marketing brand grow faster? On SKYY Vodka, you mentioned the stocking should continue at the beginning of the year, what magnitude do you expect in the U.S., can you give us a bit of color on the sell out chance there? Thanks.
If you look at SKYY Vodka, as I said, last year our depletions came in at -5%, and our shipments at -11%. Whereas if you add up Nielsen and NABCA, consumption was roughly flat. We would expect this year the depletion and our consumption to be roughly flattish. I think it's too early to scream victory on the campaign, although it is working quite well. The de-stocking will basically soften as we move through the quarter. We would expect the brand to be down somewhere in the low single digits, thanks to also an acceleration in other markets outside of the U.S. I'm not sure I caught your first question.
It was on the A&P ratio. How do you see it evolving?
Yeah. Well, we practically see the A&P ratio in line with last year. As is our custom, there could be swings ±25 basis points. We'll see how, especially the peak season of the aperitifs in the summer progresses. Clearly, if we see a longer spell of good weather, we will add on activations and leverage the good weather.
Okay, great.
Within the range I've indicated.
The next question is from Mr. Alessandro Tortora of Mediobanca. Please go ahead, sir.
Yes. Hi, good afternoon, everybody. I have three brief questions from my side, if I may. The first one is on the working capital on sales trend, if you can, let's say, give us any idea of what's next in this ratio for 2019 and 2020, let's say in the medium term. The second question is, if you can share with us any update on the disposal of the Villa Les Cèdres in Cap Ferrat. The third question is, as you mentioned before, on the outlook for Argentina, that's clearly a bit complex to figure out. What do you believe may be the performance of Campari, considering clearly the relevance of Campari in Argentina? Thanks.
Let me take Argentina. As I said, the full-year performance we've had in Argentina was exacerbated by our credit policies. Consumption wasn't down to that level. We're seeing things sort of smoothing out in Argentina. It's a pretty volatile country. We would expect the overall situation to be flattish, and that would obviously reflect upon one of the largest components of the business there, which is the Campari brand. If the overall macro environment turns slightly positive, we could also have a nice surprise there. Moving on to the villa, and I give the first question to Paolo. There are people who are interested in the villa, but as you know, the sales process is not in our hands. It's in the hands of the family. They have five years to sell the villa, so by the end of June, three years will have passed.
Frankly, if somehow they decide not to sell it because they're not happy with the price within the first five years, the villa becomes ours 100% at the end of year five, and I'm sure we'll find a seller.
Okay.
Yeah. With regards to the operating working capital trend, looking forward, we're guiding the markets toward a flattish operating working capital on net sales, which means that we're not sleeping, actually. It means that the objective is to absorb the investment in aging liquids for Glen Grant, Wild Turkey, and Appleton, basically. We will absorb those investments, which last year accounted for EUR 20 million via operating working capital containment project in existing business. Over the last years, we've also massively expanded our route to market, opening new in-market companies, and that clearly generates potentially an operating working capital drift as a percentage of sales as you internalize stocks that were previously kept at distributor level. We always manage to absorb that investment via containing the existing operating working capital.
Okay, thanks.
The next question is from Nicolas von Stackelberg of Liberum. Please go ahead, sir.
Hi. Good morning, guys. With the Italian macro looking, let's just say, not as bright as it possibly could be, is there any change to sort of low single-digit outlook for that market? The next question I have is on Campari. It's the 100th year of the Negroni, as I understand. You had a wonderful extension with the Camptails, and I'm just sort of wondering, I understand a lot of bartenders are looking for Nogroni, that is a Campari Negroni without alcohol. I'm wondering, would you consider launching a product like this? If not, why not? I would assume it's probably more additive to the mother brand rather than being cannibalistic. The last question, I was just wondering if you, Paolo, could discuss the sort of trade-off between growth and margin and returns on capital for Glen Grant.
As you pursue more of a value strategy, clearly there's an aging nature of this product, so your returns probably get depressed to some degree. How do you think about that? Thanks.
Well, starting off with Italy, as I could share some of the concerns you might have on the macro side, what we're seeing is still pretty strong consumer confidence, and consumption at this stage is at a very nice level. We've had bigger macro issues last year during the back and forth with the European Union, and we saw consumption doing extremely well. Our early indicators for this year are again underlining that fact. We'll see how it goes. Having said that, even in the years when we've had really big issues in Italy, we've always managed to grow the business in those single digits, thanks to our ability to take market share. All of the franchises are pretty solid, and we have a few good ideas to reinforce our smaller size of the aperitifs. We feel good about the Italian business.
Moving on to Campari Negroni, Nogroni. We think there's only one Negroni, and it is the original invented by Count Camillo Negroni, and we will not move away from that. We say no Campari, no Negroni, and it has alcohol. Having said that, we believe that the non-alcoholic aperitif area is interesting, which is why we're expanding Crodino into many European markets, quite successfully, I might add, and looking into becoming a player in that area, potentially with other franchises as well.
Okay.
Yeah. With regards to the Glen Grant strategy, as you correctly pointed out, we've seen a very strong traction on Glen Grant high-end propositions, the 10-, the 12-, and 18-year-old, as well as the special finishes. Basically, what we're trying to do is to lay down potentially more stock, and on the other end, to contain consumption of younger proposition, like an aged 10- and 5-year-old. Clearly, it's a gross margin play. The more we see the older age propositions grow, the more we contain discounts, promos on an aged 10- and 5-year-old, and the more we put an aged 10- and 5-year-old on allocation.
In the short run, you see potentially a negative hit on the top line that is broadly neutral at gross margin level. Going forward, once we cycle through the pain of increasing the aging liquid stock for the 12 and above, we will see a dramatic increase in gross margin value and as a percentage of sales.
Okay, thanks.
You're welcome.
The next question is from Ms. Paola Carboni of Equita SIM. Please go ahead, madam.
Yes. Hi, good afternoon, everybody.
Hi, Paola.
Hi, good afternoon. Just two questions from my side. One is probably simply a clarification. You mentioned potential 90 basis points margin expansion for full year 2019. I wanted to be sure you were referring to gross margin, or to overall, organically. In particular, I want to be sure about what you would anticipate in terms of agave cost for 2019. My understanding is that there shouldn't be any positive impact clearly, but nor a negative one. I don't know if I am correct compared to full year 2018. A second question is more on the evolution of your SG&A line. Actually, I haven't had time yet to look at all moving parts for the full year and for the quarter you just disclosed.
Following you on the presentation, apparently, the major step-ups in on-premise capabilities were actually in North American markets and Southern Europe and Northern Europe. Basically, in regions where you have already strong roots actually. This is somehow counterintuitive, and I'm wondering instead, whether you are thinking, as you've probably started to mention in one of the past answers, if you're starting to think about internalizing and so directly managing your presence in some more APAC regions, like China or Japan? I don't know. Thank you very much.
Thank you, Paola, for the questions. On the first one, yes, I was referring to gross margins when I said that actually, looking into 2018, the beat to the gross margin expansion guidance from 60 to 120 basis points was partly attributable to a huge decline in certain emerging markets, namely, Argentina, as well as Russia. If you just take the last quarter of the year, Q4, and talking to the top line, and you isolate impact of Argentina, we would have had a fourth quarter organic growth of 4.2 instead of 2.1. It was a big impact. You can imagine that rise, clearly the accretion at gross margin level. We've quantified that in about 30 basis points.
Assuming that this market bounce back, next year, you will have a dilutive effect of 30 basis points that is totally driven by these markets. The 120 basis points, that is the underlying trend, might be partly offset by that effect, which is not negative to the bottom line. It's actually increasing the bottom line by dilutive in terms of margin. The point that I wanted to make is that for 2019, instead of focusing on gross margin, A&P, and SG&A, we said after two years in a row in which we achieved 50 basis point EBIT margin expansion, we feel more confident as to deliver a sustainable EBIT margin expansion also for this year. With regards to the agave cost that you've mentioned, yes, we were hoping that the agave price could start declining sooner.
Actually, it is not. We do not have the crystal ball. We're saying that there could be potentially, more a risk than opportunities on agave, but nothing big or meaningful. Whatever happens on agave, we're at the back end of the cycle. It's just a matter of phasing, understanding when it starts declining. It will start declining for sure. There's nothing that we cannot absorb within the bigger scheme of things, considering the healthy progression of our global and regional priority brands. With regards to the SG&A, probably I've lost a piece of your question. Your question is, are we envisaging the massive investments in SG&A for these coming years? If that's the question, this is not the case. Clearly, we've selectively invested in the markets you've mentioned, North America, a little bit in Southern Europe and Northern Europe.
Clearly, looking forward mid to long term, probably Asia is a market where we can do more, but nothing that will meaningfully impact 2019.
Yeah, it was more a matter of regional allocation, let's say, which was the second part of your answer. Okay, thank you.
Well, practically, we're following the aperitif trail, which makes a lot of sense for us.
Mm-hmm. Okay, thank you very much.
As a reminder, if you wish to register for a question, please press star 1 on your touch-tone telephone. We have a follow-up question from Mr. Niko von Stackelberg of Liberum. Please go ahead, sir.
Hi there. Just comparing my numbers to how your numbers came out. I was looking at the NCEE region. The other countries was a little bit softer than I'd expected. A quarter probably isn't a trend, frankly, but I was wondering if there's any sort of thing to read into there, I guess, Austria, I guess, for the full year was quite strong. Just do you have any comment on the quarter on, how that sort of played out? Thanks.
No, actually, with the exception of Russia, we did very well across all the markets of the North and Central Eastern Europe business units. I wouldn't read anything into it there. Obviously, there is some phasings into customers, ordering patterns, this and that, but the overall good momentum in terms of consumption has been kept in Q4, and Q1 is looking good as well.
Excellent. Thank you, guys.
For any further questions, please press star and one on your touch-tone telephone. We have a question from Mr. Marco Baccaglio of Kepler Cheuvreux. Please go ahead, sir.
Good morning. Just a quick question on the M&A impact in 2019. What is the queue of your disposals and the end of distribution in terms of sales for this fiscal year? Thank you.
If you look at what's left in the other business, 5% of it is local brands, 5% is agency brands, and about 5% is what we do in terms of contract packing, mostly in Australia and some other things. Net, if you look at the big picture, what would we have to dispose is 5% of local brands. I don't think this is the best time to do that. With regards to agency brands, we'll look at them on a one-by-one basis and decide whether it makes sense for us to keep them or not.
Okay.
As a reminder, please press star and one for questions. We have a follow-up question from Marion Cohet-Boucheron of MainFirst. Please go ahead, madam.
Yeah. You were just commenting on Q1 that looked good for now. Is there anything else we need to be aware about for Q1, like phasing or any other issues besides the Skyy stocking that will continue?
No. As we said, for our overall outlook for the year, we have pretty good momentum behind all of our key brands and key brand market combinations. We're feeling good. With regard to some developing markets, they should do better this year than last year. But, before coming out with any bullish sentiments, we'd like to have at least six months of trading under our belt.
All right.
The next question is a follow-up from Nico von Stackelberg of Liberum. Please go ahead.
All right. I guess I just have one last question here on Bulldog. I'm sort of wondering about the brand repositioning that you discussed, and can you just remind me where we are with the I guess there were sort of volume earnouts with the acquisition. Can you just remind me where we are there? Thanks.
Well, we're doing quite well versus the earn outs. We're actually running ahead of the game.
In terms of the brand repositioning, what's that all about? Thanks.
It is essentially mostly image-driven and the campaign angle behind that. We developed a global campaign, and we're running it out. On the other hand, in some selected markets, we did pricing.
Okay. Thank you, guys.
Sure.
Mr. Concewitz, considering at this time there are no questions registered, sir.
Great. Thank you all very much for joining us. We look forward to further dialogue in the weeks and months to come. Thank you. Bye-bye. Bye-bye.