Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Campari Group 2018 First Quarter Results Conference Call. After the presentation, there will be an opportunity to ask session. At this time, I would like to turn the conference over to Mr.
Bob Concewitz, CEO of Decaturi Group. Please go ahead, sir.
Thank you very much and welcome all to all of you for joining us this afternoon. If you have our presentation under your is that I'd ask you to move on to page number 3 so I can start with the summary. As you can see from the summary chart, our profitability indicators continue to benefit from quite a positive sales mix across key brands and markets. However, the organic top line was impacted by emerging market softness as well as some expected phasing effects, which put together magnified in a small quarter. You will recall that on average, Q1 for us is about 20% of sales.
And in many emerging markets, it's actually much less than that. So obviously, things will get magnified. Looking at the results in details, organic growth came in at 2.2%. Our global priorities were up 3.8% and very good performances by Aperol, up almost 23% comparison 0.6%, the Grand Marnier edging up to 4.2% and while Turkey at 6.2%. But these were mostly offset by double digit decline which we expect in the Sky portfolio as well as a decline in Jamaica and Ronan's portfolio, but I'll explain that later on.
Our regional priorities were down 1.3% and this is due to the double digit decline in the low margin Transano portfolio as well as some local priorities. For our key brand market combinations, and we continue to maintain a pretty positive underlying trend. Obviously, the exception is Sky, but also Sky has started to, basically stabilize its progression. On a reported basis, net sales are down 8.2% but clearly this reflects the negative perimeter, which was down 2.9%, but most importantly, the already flagged ForEx which impacted us by negative 7.5 percent. Moving on to EBIT.
EBIT adjusted, well, very good organic growth 8.9% with 100 bps accretion on sales. Clearly, the strong organic gross margin expansion of 250 bps helps more than compensate the phasing effects as well as the increases in A and P and SG and A on a reported basis, we're down 5.1%, but still show a 60 bps accretion taking into account the negatively of disposals and ForEx. Our EBIT grew overall by 30.2 percent to 82,700,000 and this takes into consideration positive operating adjustments of C21.6 million dollars, which are driven by the capital gain on business disposal, particularly our carbonated soft drinks, net of some provisions for restructuring costs. Pre tax profit On an adjusted basis, came in at 54,900,000, up 1% and on a reported basis by 76,500,000 up 42.7%. Net debt came in at CHF 938,700,000, which means we generated CHF 42,800,000 net cash, clearly mistaken to the consideration both the sale of the soda business as well as the acquisition of Viscree and the purchase of own shares.
Nonetheless, our net debt to EBITDA ratio is now down to 1.8x. Moving on to the Chart number 7 because the previous one will be commented in detail by market and as well as by brands. You can see how our overall progression shows the impact of ForEx negative 7.5 as the progressive strengthening of the euro in the quarter against the U. S. Dollar the real, the Jamaican dollar Argentina pesos and British pound obviously had an impact.
Moving on to track number 8. Not much news here except that clearly with robust growth on developed markets and weakness and phasing effects in developing markets that ratio shifted a little bit, and we're up to 83% developed versus 70% emerging. Moving more into the detail in the Americas, we see that the U S had good growth of 3.5% and this, despite a pretty Up comp base. You remember that last year, we were up 7.5% in Q1. Now, the positive performance is driven by continued solid growth of Wild Turkey, Espolon and Cabo, but our tequila's are quite hot and continued double digit growth in Aperol and Campari.
Clearly, these results helped offset the negative performance of SKYY, which continued to decline due to the persistent competitors category issues, particularly weakness in flavored vodka. Importantly, though, these effects were amplified by the distribution transition we had in Q1 2017 when we moved 17 States to Southern Glazer Wine And Spirits and obviously there was a pipeline effect, which creates a comp base. Sell out trends though on Sky are pretty stable at mid single digits. Jamaica did quite well, up 13.9% on an organic basis. The sustained performance is driven by Campari, which growing at a high double digit as well as Appleton Estate, as well as some local brands.
The offset there in this case is Rain that he over approved which in the comp base, discounts the fact that it was impacted by preloading in Q11 of 2017 ahead of a price increase in Q2 2017. You'll recall that in Q1 2017, what, overproof was up almost 47%. Moving on to Brazil. Brazil is down 32.1%. Actually, Q1 is smallest in Brazil at about 16% of the annual total.
And it was impacted by both account base. Last year, we were up by close to 52%, 51.7% to be exact, as well as tightened credit policies on our part within the context of pretty challenging macro and political environment. We have temporary declines in Sky, Sagativa and rare, but the and we were not able to offset these by strength on Aperol, Bulldog and China. Argentina was now 5.2%. Again, here, key drivers, macro weakness, as well as our desire to tighten credit policies within the macroeconomic environment.
Having said that, the underlying trends behind our brands are all pretty solid. The rest of the region grew up by 8.2% with robust performance in Mexico percent, double digit growth in Peru was Canada was broadly flat. Moving on to semia, which was up percent. Italy had a pretty good quarter, up 3.9%, very positive trends on Aperol and Campari as well as good trends on our single serves. In this market, and strangely, it was the only one in Continental Europe, which was positively impacted by the Easter shift that helped as well.
If we look at the rest of the of the region. We're down 8.1%. The key driver here is actually South Africa. Remember that last year, we set up our new distribution platform in South Africa and Q1 was a big pipeline for a month So if we look at the underlying, depletion and actually consumption, we're actually growing very robustly. So we're not worried about debt.
Other key markets such as France continue to grow nicely, Spain as well, Aperon Campari, the usual suspect And we're happy to note that Nigeria is back to growth, again, driven by Campali as well as by Sky. GTR saw an overall flat performance, but that's on the back of a pretty tough comp base in Q1 of last year where we've grown by 18.2%. Moving on to North Central And Eastern Europe, we're down 3.8% on an organic basis, Germany was down 2.6% for the weak start to the year. Aperol is growing very, very nicely, up 21% in well as Bulldog, SKYY, and Wild Turkey, but from a lower base. But clearly, all those put together weren't enough to offset the negative performance of low margin agency brands and sparkling wines.
Campari was also weak as putting more and more of an emphasis on the on premise, and there's a channel mix effect here, whereas as I have now was hampered by significant price repositioning we took at the beginning of the year. Russia was down 30.5% Again, here, we have an unfavorable comp base. In the previous year, we grew by 86.5% and added to that, the impact of price increase negotiations, which dragged down a little bit longer than we planned. Obviously, this is a market which remains volatile. Having said that, though, the sellout data remains positive across the portfolio.
Looking on to the rest of the region, we're up 6.9% with robust performances across the majority of our markets and particularly up to the UK, up 13%, again, driven by Aperol, Rudolf Campari, and the Magnetic tonic lines. Running up the regions of Asia Pacific, which actually had a very strong quarter up 17.8%. You remember, last year, we had a weak quarter due to weather and competition related issues Having said that, we're continuing to take good market share across our portfolio, particular very strong double digit growth of Aperol Campari. Wild Turkey is performing quite nicely. Skybulk and Espolon as well.
Importantly though, the Wild Turkey ready to drink return to growth, thanks to the pack size innovations introduced to the it. The rest of the region was up 44.8%, very positive performances in Japan, driven across portfolio, New Zealand also did very nicely. Clearly here in the rest of the region, we're talking shipments of these per formances will even out during the rest of the year. Moving on to the detailed review by brands. Federal on page number 14, up 22.8%.
Here what continues to be very, very encouraging as the continued pause performance in core markets, Italy, Germany, Austria and Switzerland are growing high single or double digit And on the other hand, we have very, very robust growth across all the rest of the market. And in particular, we're happy to note in the U. S. Which has now become our 3rd largest market in value. Campari continuing to grow very nicely despite weakness in South America You know that Brazil and Argentina are large markets for the brand.
Despite that, we're up 6.6% with very nice growth across markets. Sky, as I mentioned at the beginning, continues to be impacted by softness in the U. S, although the trends are stabilizing. And if we look at the latest NAFTA, maybe there's some shimmer out hope a little bit too early to say anything on that, but at least we've stabilized the trend. But clearly, Sky was also impacted by the phasing as well as the weakness in emerging markets as Argentina South Africa and China are important markets for the brand.
Moving on to Grand Barnier, up for 2.2 since here, the key driver is the core U. S. Market. The brand is reacting well to for relaunch efforts. We're only at the beginning of them, so let's wait and see.
The American whiskey portfolios were nicely up 6.2% with practically strength across brands as well as markets. The rum portfolio was on 4.5% in here. It's a mix of things. Appleton Estate doing okay. It's mostly right nephew overproof, which a sizable brand in Jamaica and clearly the on a shipment basis, it is feeling the impact of comp base.
Nonetheless, from a pure consumption standpoint, the plan is trending very nicely. Moving on to Espolon on the following page, continued double digit growth up 28.8%, very strong in the core U. S. Growing stronger pace, 45% and very nice trends across the market. Obviously, this number would have been stronger.
We had the overall weakness in Russia. And Russia is quite an important market for the brand. On the other whiskies, GlenGrant has been in that from phasing as we're switching from MH to age variance and we're allocation, allocating available volumes but it will recover during the year. 40 Creek is a tale of 2 differences doing very well in Canada and and poorly in the U. S.
And that is something we're looking forward to fixing in the quarters to come. I'm adding portfolio relatively flat with ups and downs across markets and brands. Clearly, price repositioning on Averna, which in Germany, which is the 2nd largest market impacted the overall portfolio. Whereas Frangetico is seeing nice growth in Spain and Australia, but is, by temporary weakness actually more phasing in the U. S.
Internal markets. Moving on to RoundUp the Spirit portfolio, Bulldog Jin, doing very nicely, growing 14% with strength across markets. Moving on to Transano, clearly, its 2 largest markets are Russia and Argentina. So this is impacting the brand. On sparkling wines, we have more of a mixed performance, but net to net, we will cycle this as we go through the year.
The rest of the Sparkling portfolio was up 28% with the Proseco interest in Proseco in markets in line with the growth of the after all spreads helping drive the performance of these brands. To round up the portfolio, Campari Soda, flattish, up 12, 1.9%. We're seeing it flat in Italy. Where is it starting to up some momentum in seating markets, particularly Germany and the UK. And we're so to see the same thing on Crodino.
It's a very flattish, but very strong growth in international markets where we're coming from a small base but it's contributing nicely to the overall performance. We have a nice turnaround in our Wild Turkey RTD business in radio behind innovation, whereas the Brazilian local priorities, Brea and Sagativa are impacted by the overall environment. As well as our, tightness on credit. Ouzo really flattish wouldn't lead much into it as in its largest market tour of Mirene had turned around very quickly in April. And Cabo is continuing to accelerate, benefiting from the tequila boom in the U.
S. So net to net growing 27.2%. This was excellent from a brand perspective. Now let's follow the next numbers.
Thank you. If you follow me to page 21, we have the 1st quarter EBIT adjusted analysis, it's key drivers EBIT adjusted that came in at 1,000,000, down 5.1 per on a reported basis, but up as a percentage of sales from 17.6% of last year to 18.2%. Looking at the organic performance, EBIT adjusted was up in value by 8.9% well ahead of the top line growth of 2.2%. That's leading to 110 basis point EBITDA adjusted margin expansion. The EBITDA accretion was achieved on the back of significant organic gross margin expansion of 250 basis points, totally driven by a favorable sales mix.
Which was partially compensated by higher A and P investments, which accounted for 50 basis points negative, and higher structure costs on the back of investments in distribution capabilities, which I counted for 90 basis points, gross margin dilution, sorry, EBIT margin dilution. With regards to perimeter, In value, it generated a negative impact of 5.4 percent or 1,000,000 in the first quarter and FX had a negative impact in value of 8.5 percent or 1,000,000. With regards to the clean EBIT, it came in at 1000000, up 30.2% after positive operating adjustments of 1,000,000, driven by the capital gain from the Lemonsata disposal, which accounted for 1,000,000 and a net of the recognition of provision for the structuring cost in the U. S. And Brazil.
EBITDA adjusted came in at 1000000 down 5% in value on a reported basis and at 22.2% on sales. If we move on to the following page more in detail, we can see gross profit on a reported basis was down 3.6% in value and up to 190 basis points on sales to 59.5 percent in existing business, organic growth of gross profit was 6.7 percent in value or 250 basis points margin expansion, which is quite a remarkable result considering the last year, Q1 delivered 140 basis points, gross margin expansion over prior year 2016. So it's 50 over 114. The organic growth of gross margin was well ahead of the top line thanks to the favorable sales mix by brand and market with over performance of key global regional priorities in developed market such as Italy and the U S, but I would also add the Aperol and the Aperol portfolio in Germany. That's leading to a additional comps as a percentage of sales.
ForEx and perimeter had a negative impact, but a meaningful one in value, 10.3% driving 40 basis points of margin expansion, following the disposal of low margin businesses. The A and P on a reported basis, was down 7.4 percent in value, but up 80 basis points on sales to 16.1 percent. In existing business, A and P grew by 5.4% in value. That's leading to 50 basis points of EBIT margin dilution. And this is purely driven by phasing effects of our investments more skewed now into Q1, as well as Q2, we'll see later.
Reflecting major investments in global brands such as Campari and Carmonier. On the other hand, ForEx and perimeter had a combined negative impact of it 20%, driving 30 basis points of EBIT margin dilution. And again, this is the technical effect of the disposal and deconsolidation of low and petasity businesses like car loans and Lemons SG and A on a reported basis were down 2.6% in value, but up 150 basis points on net sales to 50%, 25.2% In existing business, the SG and A growth is under control at 5.9% in value. We have 90 basis points and margin dilution that is primarily driven by the soft start of the year with regards to the top line. So we expect the time goes by, the dilution will normalize.
And of course, the the dilution is reflecting in the quarter the full year impact of group investments in distribution capabilities that were completed for last year. Coupled with the disproportionate incidence of the structural cost on sales in a small quarter. But as we saw before, accounted for just 20% of sales last year. Forex and perimeter had a combined effect of minus 8.5% in value. And draw 60 basis point intermargin dilution.
If you move on to the following page, page 23, We have the analysis of the consolidated P and L through pretax profit. We can see net financial charges can at 1,000,000 in the first quarter of this year, down by 1,000,000, and it is driven by drivers. Number 1, we had a reduction in the average cost of net debt from 3.1% last year to 2.7% this year. Successful execution of liability management transactions. And secondly, the average indebtedness decreased from 1 1000000000 to 1000000 in the first quarter of this year.
Group pretax profit came in 76,500,000, up 42.7 percent year on year. But once we take into situation, the nonrecurring adjustments, pretax came in at 1,000,000, up 1% were just
last year.
Moving on a couple of slides, page 25, we have the analysis of the group and financial debts which decreased by, as we saw before, 1,000,000 versus December of last year. To 1,000,000. That numbers, fully factors in the positive impact of the disposal of Lemonsara Business, which generated a influx of cash of 1,000,000 as well as the sale of the biscuit business, which generated a cash outlay of 1,000,000. The long term gross debt is still a EUR 1,300,000,003,001,000,000 and that is currently paying an average coupon of 2.4%. The net debt to EBITDA ratio on a pro form a basis, came down quite solidly from 2% to 1.8%.
And that puts us in a very good spot to leverage our capital structure if we needed for future M and A activities. Is it on numbers, Bob, I wouldn't talk to you for the new marketing initiatives
section. Thank you, Paolo. I'll quickly go through the initiatives and then we'll open it up to your questions. Just to highlight off kickoff of Grand Marnier where we staged a very premium event in New York for the relaunch with the new campaign and to set the standard for the look and feel for the brand going forward, there was very school. We got a lot of, social media coverage and the campaigns on there right now.
So so far, so good. Moving on to Campari, I think everybody's familiar with our short films now. What's important for the brand equity with regain control of the Campalino brand in the historic Vitoria Emmanuel Galleria in Milan, and we will restructure this going forward and will become an important brand house for us as Milan has become quite a tourist magnet in the last few years. Last but not least continuing to build brand equity. We've launched a very limited edition but highly sought after by mixologists called Campari Cascetails, which is H Campari in Bourbon, barrels, these went off like hotcakes.
I think there's almost a black market for them at the moment. It is doing the brand a lot of good and there's more to come in following years. The most important piece of news though is the launch a few weeks ago of our cooperation also on the brand and product and liquid side with Matthew McConaughey where he spent quite a while collaborating very closely with our master distiller, Eddie Russell and his signature, the new cosign, let's say, bourbon non branch has been launched to very strong, reviews both from the trade press as well as bloggers and specialists was launched interestingly live on social media, very interesting as the marketing exercise and very successful as well. And we've been overwhelmed by customer orders. Now, in a month to come, the jury will be in the consumer sport, but we're pretty confident.
So before opening up to your questions, just to summarize the overall Q1, as discussed 51, sales organic results were impacted by emerging market softness as well as some expected phasing, which put together, were magnified in small quarter. On the other hand though, and more importantly, profitability indicators continue to benefit from a very positive sales mix by brand and market. On a reported basis, Looking into the rest of 2018, our outlook remains unchanged, both in terms of organic growth drivers as well as parameter for its impacts. On the organic side, we expect our sales to be driven by the continued outperformance of our key high margin global and regional Priority brands in our core developed markets. We expect gross margin expansion to be driven by that favorable sales mix, helping to overcome AdWords agave price impact, as well as A And P And SG And A.
The latter, though, we expect remained stable in organic terms as a percentage of sales. Looking at Perimeter and ForEx, the perimeter side, we have an estimated negative impact of C17 million dollars in sales and C16 million dollars in EBIT adjusted on a full year basis. This reflects the portfolio streamlining as well as discontinuation of some agency brands, clearly with a broadly neutral effect on adjusted EBIT margin on sales. On the ForEx front, we're expecting an estimated negative impact of 90,000,000 sales and $24,000,000 EBIT adjusted on a full year basis, reflecting obviously the evaluation of the U. S.
Dollar to euro. Nonetheless, putting all of this together, we feel pretty confident in delivering a positive performance across all of our key underlying business indicators in 2018 as well. This is it with regards to results and look forward to your questions.
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer you. The first question is from Olivia Nickoli with Morgan Stanley.
I've got 3 questions, please. The first 2 actually on gross margins. The last one is on Italy. So the gross margin improvement, your 250 bps in Q1, you said Paolo that it was due to sales mix, which was positive. Now could you just quantify the gross margin impact from the Aperol brand only?
Because obviously, the brand grew at like 23%. Assumes the gross margin would be much higher than the rest of the group. So that would be great if you could give us a bit more color. Second question is, again, gross margin on a full year basis, obviously 250 bps in Q1 is a lot. So how should we think about your gross margin improvement on a full year basis?
And lastly, on Italy, Aperol has been showing exceptional growth for now a number of years. In Italy. Could you just remind us what is your primary source of growth? Are you gaining monthly share from past periods or is it wine or is it actually beer? Thank you very much.
Let me take the last one and see if you just want to respond. I mean, Aperol is continuing to grow depending on the month, either high single or low double digit on a consumption basis in Italy, I mean, all of the data we have tells us that reliably over time, 2 thirds of the consumption comes from beer and one third from sparkling wine and wine. Clearly, this might increase a little bit as we continue to move into new drinking or patients. I in the formal meals?
With regards to the disproportionate increase of gross margin in the first quarter, accounted in existing business for 250 basis points. Of course, Aperol takes the lion's share, but it's not stacker, you know, with a very moderate top line growth of 2.2%, also brands like Campari growing 6.6%, Grand Marnier 0.2% where Turkish is 0.2% has fallen 29% and bulldog 14% they all contribute to the gross margin expansion. And on the other hand, clearly geographies like Russia, Brazil and Argentina, which went south further contributed to the gross margin expansion. As we, yes, and also the single serve opportunities in Italy, which are relatively big brands. They do fetch a nice gross margin on safe.
And also they were on the the positive side. Looking at the offer of Bramper said, that's your question, you know, in the first quarter, the group delivered 59% gross margin on sales. This is a brand. As we said, all global priorities, there is more than any% gross margin on sales. So 22% return on the math, but it's quite a meaningful impact.
With regards to the second question, which is gross margin on a full year basis. So far, we're not changing our guidance. We believe the business is naturally running with 120 basis points gross margin expansion of which 60 basis points are dented by the price increase on the agave. So net, of the aggregate effect that will be, you know, would be feasible for the whole 2018. The ease in 2018 onwards, the gross margin expansion is expected to come in at 60 basis points.
Clearly, we need to understand how Q2 and Q3 will unfold but to change guidance. But for the time, if you have also to recognize the fact that the first quarter in EBIT terms is 17% of the last year, EBIT. So it's a very preliminary quarter for us, the first one.
The next question is from Alicia Faury with Investec. Please go ahead.
Just a couple of questions. 1, you mentioned shipment phasing, a number of times. And sounds like that was behind some of the very steep declines in the number of the brands. It also seems to be a feature across and a few different markets. So I'm just curious if we can just dig into it a bit more.
Is this all Easter timing and the U. S. Distribution and changes, or are there other factors at play in Q1 that caused this phasing, which seems to be a bit more than usual in the quarter? And then, excuse me, secondly, the Appleton Estate brand, I think, was a bit weak, but seemed to be strong in Jamaica. I didn't quite get the explanation as to where the weakness is coming from with that brand.
So maybe if just talk a
little bit about that too.
Let me take the overall phasing question. I mean, obviously, we're impacted by what happened prior year. Last year in Q1 was a year of important changes. The one hand in South Africa with our new route to market and partially a large part of actually the route to market is with 3rd party distributors and there was the pipeline effect into these distributors. The same was, how true for the 17 states in the U.
S, which we move to sovereign wine and spirits. And if you look at Brazil and Russia, they were all so impacted by a very, very high comp basis last year. So these are the ones we're taking mostly into consideration. There are some other things as we move now, minor changes to route to market on certain brands in certain areas, where we've held up shipments. But overall, it's more the comp based on those 4 big ones, which made a difference.
Now with regards to Appleton Estate, it's largest market is in Canada, and we were actually flat in Canada. That's what impacted the overall number.
The next question is from James Edwards Jones with RBC. Please go ahead.
You that the global priority brands deliver or deliver over 70% gross margins. And just the record, I presume that includes Sky. And can you give us any quantification of how Sky's gross margin compares with the other global priority brands? And secondly, Could you give us an idea of how the 2.2 percent splits between volume and value?
Yes. With regards to the first quarter, to the first question, we do not disclose gross margin by That's something also we gave an average number, which enables you to appreciate what is the gross margin, gross margin impact.
Can I just check? I've got this right then. I think you said all global priorities deliver over 70% gross margin. Is is that correct? Okay.
So that will include Sky?
The next question is from Marianne Boucheron with Raymond James.
Hi. Good morning. First question on the phasing impact, where would you expect to recover from this phasing. I mean, one would be the new routes to market implemented and
Could you speak up
a little bit louder, please?
Yeah. Can you hear?
Yes.
Yes. So I was asking, on the phasing impact, when do you expect to to get the, well, the benefits from the route to market changes. And so we should, get the early selling back on the brands. And then on emerging markets, could you give us maybe some favor on what you expect during the year, maybe in in Brazil, the Russia or Argentina, and if we could talk about also inflation there.
Well, we would expect to recover the phasing in a combination of Q2 and Q3 with the bulk of it coming in Q2. Moving on to emerging markets. I mean, if you look at them, we were pretty straightforward when we released our full year results and gave a guidance and said we expect them to be volatile this year. And that's what we're seeing. We're seeing very different things in different markets.
Now in Russia, and downs, we don't see that changing over time. Underlying consumption is there, but customers are pretty moody. With regards to Brazil, unemployment is increasing. We tend to have elections this year. So we wouldn't really expect anything positive coming out of that market, unfortunately, this year.
Whereas Argentina, we all know what happened week with the central bank intervening and strong inflation being fueled. Obviously, in all of those markets, we recover inflation via pricing. Consumer demand is there, there's no, confidence really to lay out. And they're all in a wait and see sort of a sort of approach So I think a prudent outlook for those three markets would be for them to be flattish this year with potentially better performance in Russia and Argentina going forward.
The next question is from Biyashini Vonageo with Brian Garnier. Please go ahead.
You.
Yes, we would expect Germany to grow somewhere in the mid single digits on a full year basis. Us.
The next question is from Paola Carboni with Equita.
Hello. Hi. Good afternoon, everybody. I have a couple of questions. The first one is about the Grand Marnier.
It you can elaborate, and you comment it's organic growth by volumes rather than pricing or pricemix better? Secondly, in terms of a gross margin, should we have the impact of agave accounted for about a 60 basis point in this quarter as well? Or should we be aware of any seasonality in the overall impact to your guidance for on a full year basis? And my third question is instead on SG And A. Which actually accelerated in year on year growth was a bit stronger than the growth that we saw in Q4.
Actually, was expecting to see still some benefit to hear from the savings in the French headquarters of Grand Marnier, which I assume we should keep seeing at least in the 1st part of this year. So, basically, what should take this, growth in SG And A, lower during the next few quarters. Thank you very much.
Yes, let me take the comment on the progression question. Here, we have a world into, we had some slight volume gains in the U. S. And some more accentuated declines in the rest of the world. I mean, outside of North America, as we've discontinued all aggressive, discounting and have cut all sorts of low priced line extensions So put them all together, I would say it's more of a pricemix issue at the driver at this stage.
Yes, with the, with regards to your first question, the phasing effect of the negative impact on agave on our P and L across the four quarters. Overall, it's confirming 60 basis points. It accounts for 1,000,000 to 1,000,000 on year basis. Clearly, you're more skewed into the 2nd part of the year. And this is the fact that we're still you've seen liquid that has been aged in store at an historical cost that is lower than the current spot price.
As the time goes by by theendoftheyear, and in 2019, we're expecting, I mean, we, you know, market is expecting agave progressively come down. So the negative impact will, if expectations are confirmed will will cease in 2019 onwards. So on top of the 1,000,000 offshore, thinking at the opportunities, you know, midterm, we have, you know, the sugar business in Jamaica. Which also this year is delivering EUR 7,000,000 of losses as last year. And so, you know, this is an opportunity sitting in 2019.
So you know, 60 basis points is the overall impact of agave. So the gross margin expansion for the full year for the time being is confirmed that 60 basis point with a gross margin expansion that from 250 basis point will accept accelerating coming quarters. With regards to the 3rd question, which was the SG and A trend for this year, we're not expecting to extract any operational leverage in SG And A line. So we're expecting SG And A to grow in line with top line. So in the first quarter SG and A grew in value by 5.9%.
So we think, more or less, is the trend that SG And A will keep on having coming quarters.
Okay. Thank you. Thank you. A follow-up, if I may, you said that the business before one comment on gross margin, this business is set to deliver 120 basis point gross margin expansion, which this year will be dented by But in general, should we take this 120 basis points gross margin expansion as a normalized cruise speed for your,
Yes.
For your business, also for the following year?
Yes.
Okay. So much. I have something different. I was wrong. Thank you so much.
Yes.
On the other hand, the comments I made before on SG and A are clearly 18 to existing business to organic performance. You also have to consider that, you know, we've sold some brand that obviously absorbed the SG and A costs. So you bundle together perimeter and FX, we have a negative impact on the EBIT line of about 40 basis points dilution driven by it, clearly, diluted effect on the SG and A, and dilutive effect on JMP in perimeter, partly compensated by gross margin accretion from perimeter on the other hand, ForEx, you have a minimal transactional effect due to the U. S. Dollar trend that is basically banking the profitability of European brands and particularly the Grand Marnier 1, where most of the costs are sitting in France and are euro
denominated. Perfect. Thank you very much.
The next question is a follow-up from Olivia Nicola with Morgan Stanley. Please go ahead.
Thank you very much for taking the follow-up. 2 quick one, please. Just to follow-up, first of all, on Aperol in Italy. Could you just remind us of the key demographics in terms of age group drinking alcohol? And essentially, I know one of your competitors in town today, are you concerned that if the beer category was to bounce back, you could see a slowdown in apparel growth and how you're monitoring that?
That's the first question. I know it's multiple, but that's the first question. The second one is much quicker. On Harmony in the U. S, Are you increased the headline prices for Carmani, Calder Rouge?
Thank you very much.
Yes. No, we haven't increased headline prices on the coordination, we've basically stopped discounting it. We're waiting for the new campaign to strengthen brand equity before we do that, but we think within a reasonable horizon, it will be doable. Now moving into Aperol into the, our consumption per capita is a little bit north of 0 point liters per person, whereas there is closer to 30 liters per person. So I think there is quite a bit of room for growth there for us.
Clearly, there are a lot of players in beer trying to get into the FAICs moment, some more successfully than others. We think it's good because it keeps us on our toes and helps us to continue innovating and strengthening our marketing marketing efforts as we go forward. With regards to the Edge SKUs, we don't really have any SKUs. I mean, at this stage, I would say that we pretty much represented demographics both in terms of gender as well as in terms of age, obviously with a certain cap.
Mr. Constantovich, there are no more questions registered at this time.
Thank you. I guess, both of you have to re immerse yourself in the beer world. Enjoy. Enjoy it. We'll move on to natural spreads.
Thanks for joining us. Bye bye.
Ladies and gentlemen, thank you for joining the conference.