Good afternoon, this is the Chorus Call conference operator. Welcome and thank you for joining the CA&Pari Group Half Year 2024 Results Conference Call. 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. Matteo Fantacchiotti, CEO of the CA&Pari Group. Please go ahead, sir.
Thank you very much. So good morning, good afternoon, and evening, everyone. And thank you very much for your interest in joining us for today's call. I'm here in the room with our CFO and COO, Paolo Marchesini, and Chiara, and our investor relations team. Look, to me, we announced today a positive set of results, especially considering the current challenging industry context and broader macro context, which is still, as you know, quite volatile. We are braving the elements, a rainy Q2 in Europe and tailwinds of inflation. And yet, we still outperform the market. We have solid brand momentum and growing brands in healthy categories. So in a sea of flattish red negative signs, we post positive growth with organic net sales up 3.8%, with an acceleration, as expected, in Q2 at +6.9%, driven by solid performance across global priority brands and markets.
We see continued strength in Aperol, led by Aperol and CA&Pari, especially in the Americas and Germany. But basically, both for Aperol and CA&Pari, in all markets except Italy, France, and the UK, that were the markets most affected with poor weather in Europe. Aperol Spritz is growing from strength to strength, and it's been selected recently as the most popular cocktail in the US and is also topping drink trends in Germany. Espolòn is literally on fire, I would say, with double-digit growth, incorporating further acceleration in Q2. So I will say we have a couple of brands that, if you look at the size and the growth rate of those brands, are probably two of the best-performing brands in the whole industry. Now, if you look underneath the surface of these positive top-line results, I think we had some temporary headwinds we need to be clear about.
One is mix, which, if you remember, was supposed to be the main gross margin drivers for us this year, where, given the high inflation environment, we had soft pricing, still positive, but soft to offset some residual COGS increases. And margin was going to be the driver. So far, margin has been obviously not going in the right direction, mainly due to weather conditions. And it's obviously temporary because it may clear as soon as weather finally reflects the summer season. And July started, well, so far, fingers crossed. On top of mix, some COGS headwinds, part of which we need to bear the consequences in H2. Why COGS headwinds? Number one, it's taken a bit longer than expected to deplete last year's higher COGS inventory. And number two, we'll gradually take advantage of aggregate COGS benefits, but later in the year in 2025.
So Paolo will elaborate further on this, and I'm sure there will be questions. But why do I say temporary? Basically, I want to remind everyone that, especially when it comes to the high inventory of Aperol this year, this was a result of our CapEx investment in Novi production capacity expansion and the one-off extra productions we did ahead of the line opening. So we don't expect this to be an issue for next year. And our production stock is very much under control. So as a result of those headwinds, we still delivered EBIT organic positive growth of +2.1% with margin at 23.6%, -40 basis points versus H1 2023. And EBIT also accelerated in Q2 at +5.6%, -30 basis points versus previous year with the effect of gross margin and some SG&A expansion.
So gross margin is indeed impacted entirely by negative mix effects of fast growth, Espolòn on one side, which is still decreasing at gross margin level, and poor weather affecting high margin Aperol in those three markets, especially in Europe. Pricing is offsetting COGS. And A&P is likely accretive because, again, we couldn't activate our brands, and especially Aperol in Europe, as much as we wanted due to a very poor May, but especially June summer weather with quite a lot of rain. The net debt to EBITDA adjusted is at 3.5 times on a reported basis. And Paolo will give more color about this again later in the call. So net net, our medium-term outlook remained the same. I need to say we're pleased about our industry outperformance, confident about the momentum of our brands and our future growth ambition.
Update, we will need to discount some temporary margin headwinds. So going into the brands and the regions, so next chart. Growth has been driven mostly by global priority brands, which we see as a positive and primarily in Americas. And we consider Europe to be really resilient when it comes to the poor weather we had because, as you can see, Americas is at +6.8%, and Europe's still growing despite the weather, which, again, to reiterate, in some of the markets in Europe, affects Aperol because they are very much an on-premise consumption business. Asia-Pacific is still negative on the whole at -10%, but with strong sequential improvements. In fact, Q2 was rather flattish, and we will expand later on the outlook for the region. Global priorities growing at 6%, and regional and local priorities slightly declining. We will see why in a few charts.
So giving a bit more color about performance in Americas, you can see U.S. solid growth again, especially given the market context with Q2 acceleration of 7.2%. This outperformance is obviously driven by double-digit growth in Espolòn and growth in Aperol, and also positive performance in Grand Marnier, which we need to flag, though, had quite favorable comparison base in H1 last year due to some de-stocking. Wild Turkey is stable, and Skyy is going down together with vodka, which is one of the problematic categories in U.S. But Q2 was positive. Overall, Skyy was positive. And I want to flag also when it comes to U.S., Aperol is still growing in a very healthy way and has still a lot of runway for growth. In fact, when you look at sell-out data, it's growing double-digit.
But we had a very high comp base in H1 in US for Aperol, which is going to be much easier in H2. So we expect actually Aperol performance in US to be faster in the balance of the year. Jamaica, quite volatile performance in H1, I will say, because you remember Q1 was negative. Now, Q2 is very positive. And this is largely due to stock availability and production. The underlying consumption trend in the market is still positive. Most of our brands in rum and Magnum as well are growing well. Still, we had some supply shortages in Q1, which were offset then in Q2. And then in July, there was thunderstorm, as you know, a typhoon. And we had risks of production stock in Q3 and Q4, which we're still assessing. It was better than expected, but still not everything was plain.
Other markets in America are growing well. I will flag Brazil as probably the highlight among the other smaller markets, with both local brands and Aperol growing very nicely across all quarters and months. Moving to Europe, like I said, Europe, to be honest, quite resilient because we have a business with Aperol, which especially places like Italy, where if it is sunny, people will start probably already at lunchtime, but definitely mid-afternoon to be out in the terraces and bars drinking Aperol Spritz. If it's rainy, they stay in the office and at home, and they drink very little. In Aperol, Italy is about socializing on-premise. We had a very rainy Q2 in Italy, France, UK, to an extent even in Germany. Italy is down 5.5%. And especially in the north, the weather was bad. That has an impact.
I also need to say Italy had a quite high comp base in H1 last year, especially in Aperol, because remember we discussed in Q1 call that H1 last year, first, we had big price increases in May. So there was a forward buying, especially in March and a bit of April of Aperol. Secondly, price increases across both Aperol and CA&Pari were high single digits. So obviously, in May and June, you have the net sales boosted by that price increase that was passed to the trade. So net net, we are still seeing that in a reasonably soft market in Italy, we keep share with Aperol and with Aperol, we slightly gain share, very little share, which is still positive. Germany is doing really well. Both Aperol and even our innovation Sarti Rosa is a double-digit growth.
I need to say the number you see in Germany, both in sell-in, but also if you look at the sell-out data, is also boosted by the fact that in the comp base, if you remember, we had the listing last year. So you will see a much better number than the underlying performance is, especially now in Q2, and a softer number in Q3. But when we get to the year-to-date after Q3 and full year, I'm sure we will see a very positive, strong growth because our Germany business is doing really well. France, like I said, another poor weather story impacting Aperol, Riccadonna, although CA&Pari and Picon are growing. But again, to be clear, because you will wonder why Aperol is not growing, CA&Pari yes. CA&Pari had an easy comp base because there was some delisting last year in France.
Those were all the delisting stories for 2-3 months around our high price increases that then were all resolved in Q3. UK soft performance, I think you can see it across the industry, is a combination of poor weather and macro. And we had also a very tough comp base with H1 last year, +21%. I need to say, though, that outside of those three problematic weather markets and Germany doing really well instead, the other markets in Europe are all doing very well. Spain is growing, Greece, very strong results from our newly created IMC, also in terms of market share gain. Other smaller markets and distributor markets all growing, and GTR is growing as well. Moving to Asia, Asia is really a tale of three clusters, I will say. Australia, challenging environment, also challenging trading environment. Consumer confidence not great. Spirits category suffering.
Probably the one category that is growing and doing really well are vodka-based, white spirit-based RTDs with basically one player doing well. Most companies are losing share. We are holding share, and this is basically due to Aperol and particularly Aperol growing nicely. bourbon glass and bourbon RTDs that are a big business for us have been struggling. We've been seeing positive signs on bourbon RTDs in Q4. We have seen sequential improvements. Q2 was very low single-digit negative, whereas if you look at the RTD category, it's double-digits. Q2 was much better. We also have some innovation kicking in in July. Australia, we're a bit more confident about Q3 and Q4. The second cluster is our route to market changes that are also going a little bit at different speeds. China is done. China is positive.
We have a lot of confidence in China. We see a lot of opportunity. The team demonstrated high capabilities in executing the market change as per plan. We started to see growth already in Q2, also at the depletion level. India is taking a bit longer, and it was due to timing of registration, delays due to elections. It will be completed in H2. I think for India this year, as we said at the beginning, also due to some leadership changes and strategy resetting, it's going to be a transition year to remind everyone. India for us is very, very, very small, less than 1% of our revenue. The rest of Asia is the third part of the story, which is growing very nicely. Some of our recently launched in the last three, four years, IMC are growing share every month. Japan is doing well.
South Korea is doing well, except we have some Q1 phasing, if you remember. New Zealand is also growing nicely, especially with Aperol. Some of the distributor markets are also growing. So that's Asia. Q2 was difficult. Q1 was difficult. Q2 was better. We think H2 Asia will be back at the right trend that we need to see from that region, which is definitely double-digit. Now, going to the brands and starting, of course, with Aperol. Now, I just want to be very clear about Aperol. We're growing 5%, which is not the usual double-digit rate you will see with Aperol. This is really, first of all, growing despite the poor weather, but this is really driven by Italy and France performance. And tough comparison base we had H1 last year was at 32%.
This being said, with Aperol, we have positive growth basically across each and every other market that hasn't been impacted by weather. It's typically double-digit growth again. The growth you will be accustomed to see. And that is really in Brazil, in Mexico, in Canada, in Germany, Spain, in Greece, in Japan, New Zealand, Australia, GTR, you name it, all the key markets are going double-digit. And like I said, US was low single digit in H1 with Aperol, which is mostly a phasing because you can see both in the Nielsen and NABCA number, Aperol in US is growing double-digit. So it's important to give you confidence that Aperol is in a good place. And we're very pleased about the growth trend of this brand. And we will have a couple of charts to share later on that will probably give you also that sense.
CA&Pari as well, growing nicely, is up 9%. Accelerated growth in Q2, led by Americas, Brazil, Jamaica, Greece, GTR, France. Espolòn also against a very high comp base last year of +43%, has been growing 22% on the half and 30% on Q2. So it seems the brand is really unstoppable and growing in US, but also in Australia, in Italy, and even GTR from a small base where we're really making sure through our GTR team that in line with this brand to be a global priority brand in all your key airports internationally, you will see and find Espolòn. Wild Turkey is a bit milder? I think there is a positive trend in Q2, where it's definitely growing. And you know that Q1, we had some phasing, especially with some markets like Korea, which is now becoming one of the top five markets for the brand.
We look at this brand through this transition phase where we repositioned the brand, where we're really looking at value versus volume, and we're quite positive midterm about our bourbon leg strategic category plan. When it comes to Jamaican rums, it's basically reflecting a bit what I said about Jamaica. The performance is resilient. I think especially Appleton is a great brand with a lot of premium innovation we're launching and that is delivering really well. We had some phasing in between Q1 and Q2 in terms of stock availability, and we flagged some possible risk on this portfolio. Still to be validated with the supply team as they're looking into all the consequences of the hurricane. Grand Marnier is very positive.
I need to flag here, though, that, as I said, for Aperol, it's a positive story because we had some phasing in between Q1 and Q2 is going to be better. I need to say Grand Marnier double-digit is probably also reflecting some easy comp last year and restocking in the U.S. market, so easy comp base. Of course, we have increased marketing focus, but we expect that H2 might not definitely grow at that pace. And we did comment about Sky already. When it comes to regional priorities and local priorities, sparkling wines, chA&Pagne, and vermouth are growing nicely. When it comes to other whiskies, it's mostly a phasing one-off issue. As you know, especially Glen Grant is very much skewed into Asia. We had a very high comp base last year, +31.
And obviously, some of the route to market changes and the phasing in Korea affected the half. But we see Glen Grant on a full-year basis would go back to very positive performance because in terms of market share, it's doing very well in Asia. Of a small base, but starting to really pop up, definitely top 10 or in some market, even top 5 brands in single malts. Other specialties, the decline is mainly driven by Magnum. And to flag, although the -1% is not that positive, but on non-alcoholic, it's really a Crodino story, which is our non-alcoholic play on aperitif is our non-alcoholic spritz. And everywhere is growing double-digit, and we're really quite excited about the opportunity with this brand. We had very strong plans starting from Europe and then to expand possibly in other regions next year.
The decline is mostly a combination of weather in Italy and then streamlining the range to really focus now on very focused game on the non-alcoholic spritz variant. We basically delisted some of the minor flavors which we have in the base in Italy. When it comes to local priorities, I would say CA&Pari Soda is again about Italian weather. I think worth mentioning Wild Turkey RTDs, which, like I said before, yes, Q1 was, if you recall, negative double-digit, and Q2 is positive, so it's +2%. There is ongoing pressure on the category, but at least we see that the brand is responding to the activities that we put in place.
Now, before moving to some of the usual marketing highlights, just one page on Aperol, which is a number of consumer insights and studies we received recently that are giving us quite some confidence that we knew already, but it's always good when you have news that are confirming what we think. First of all, there was a study in U.S. that found that Aperol Spritz is the most popular cocktail in the United States, with 22 states ranking it as their favorite. The source of this study was Forbes magazine. By the way, very interesting for us to see that coincidentally, or maybe not coincidentally, where Aperol is number one swing in the map, which is where you see the light green color, it's mostly overlapping to the places we always told you we were investing in field activation for Aperol.
But equally, we can see that then the opportunity we still have elsewhere to try to make the whole map light green is definitely there, and especially in the red central areas. Same with Nielsen in Germany. There was a study on the on-premise market recently that found that Aperol is still gaining considerable traction among German consumers as the top gastronomic drink in 2024. It has emerged as the most on-trend drink category with increase of 9% in consumer preference. Then another article that was talking about Aperol as the hit drink of the summer season. This is happening every summer. We see that. And then it is more across the portfolio, but I think something that again gives us very strong confidence in our team capabilities and impact in the U.S. As most of you know, recently, there were the Spirited Awards at Tales of the Cocktail in U.S.
Within the Spirited Awards, they did a survey in the 135 venues that are subject of these awards that are typically the best bars in the U.S. or the ones that are voted as the best bars in the U.S. They analyzed all the menus, which meant they analyzed more than 1,000 cocktails to understand what were the most utilized ingredients. Basically, CA&Pari Group was the number one supplier among the survey of all and the best place in terms of cocktail presence and our drink strategy executed in those accounts. Those are some highlights that are giving us, again, the usual strong confidence, especially on our aperitif portfolio and Aperol.
Now, when we move to some of the marketing highlights, we discussed last time about our CA&Pari activations and 2024 marking the return of CA&Pari to the Cannes Film Festival for the third year as an official partner. Now, this is the pinnacle of the many international film festivals that we're partnering on with this brand, trying to establish a mental link and associating the image of CA&Pari with cinema. This year, we further enhanced our presence in Cannes with two locations: the CA&Pari Lounge overlooking the red carpet at the Palais des Festivals, and the CA&Pari Beach, which was a new iconic space on Boulevard de la Croisette, where we hosted movie stars and guests with a rich program of events open throughout the whole day.
As we did for the Australian Open, you recall in Q1, we discussed about our 360 experience activation with integrated on and offline touchpoint activation through on and off-premise airport and digital, and also partnerships with media and celebrities. This is what we did in Cannes, including key movie partnerships, a strong focus on digital authentication, and media partnership with Condé Nast. A lot of cinema-related talents you can see here in the picture, some beautiful actresses where I actually forgot the name, but you can see I was enjoying the very entertaining company of one of our guests, Adrien Brody, in the picture, which, if you recognize him, he did many movies, but I think what most of us know is the pianist.
But long story short, those are people that are really A&Plifying through their channels our activations and really seeding in culture and in everyone that's interested in cinema and coveted events like Cannes, our brands in society. The results are very good. CA&Pari indeed ranked number one for earned share of engagement across all other sponsors. I can tell you there were a lot of activations from other sponsors, so we're number one. We achieved 3.6 million earned engagements, significantly high versus last year, serving then in our venues more than 20,000 CA&Pari cocktails, which is bringing liquid to lips to a very selected number of individuals. We did the same in Art Basel, which is another, obviously, very prestigious art fair.
This year, we enhanced our presence with basically the team from CA&Parino, bringing to life what I call the best of Italian hospitality, which means that under the flagship of CA&Pari, we can also leverage the food portfolio. And again, with a lot of media partnership and talents to A&Plify our presence. Again, here, great results, 2 million impressions. We were ranked number one for earned share of mentions and engagement across all sponsors again, and we hosted 7,000 guests in our lounge.
What I also like to bring to life here is that our CA&Parino property really bringing to life the art of Italian hospitality and mixology is something that we can leverage really well in those events and in some prestigious locations, which is what you can see in the next chart, which is mostly an invite to go and visit for everyone that will be in Europe during summer. In the beautiful garden of Hotel Hermitage in Monte Carlo in Monaco, you will find this beautiful CA&Pari lounge, which is also showcasing some of our CA&Parino bartenders creating amazing drinks. So that's mostly about CA&Pari. When it comes to another priority brand like Espolòn, first of all, this year, it marks the 25th anniversary of this brand. I just want to remind everyone this is a brand that we grew 22 times in the last 10 years.
So it's really an anniversary that celebrates the great success of this brand, which is now a global priority brand. As such, we launched the first global cA&Paign. We just launched it, so we don't have results yet, but we're very proud of this cA&Paign, which is called To the Bone, launched for us for now in U.S. and Australia. A bit of a departure from the industry standard backdrop of Agave Fields. This cA&Paign is shot in the inspiring creative hub of Mexico City, realizing the contemporary unstaged vibrancy of Mexican culture, which is at the core of our brand. Moving into Aperol, I'm going to go a bit faster here because we already presented a lot of details in previous calls, but just to give you some highlights and pictures and bring to life our presence in the big festivals across the world.
Actually, I would say from big festivals to small events to focused city Orange Wave activations. So you can see Coachella and Primavera Sound, which are some of the biggest festivals, music festivals in the U.S. and Europe, Spain, namely in the first chart. In the second chart, you can see some of our 360 activation in Greece across beach bars, but also with a full 360 consumer journey, activating also visibility in transport, in stations, in digital, and then in on and off-premise. Similarly, in Germany, in the U.K. And then we have a city strategy in Asia-Pacific, and especially during the summer season, where we think we can also leverage the presence of a lot of tourists in the seasonal hotspots. We start to activate, and this is what you see in this picture, places like Bali and Thailand. So that's Aperol.
And by the way, I'm not going to bore you with the details, but also with Aperol, huge success in terms of our activation. I think we're becoming best in class in that respect. And I just want to mention one at Coachella. We were the number 3 brand for social share of mentions this year. And Coachella is a brand that is activated by a large number of brands. You are not talking about drink brands. Each and every brand is one of the biggest things that happen in the U.S., probably after a few others like Super Bowl and so on. So number 3, and of course, number 1 in food and beverage. So being the second year we do it, we're really very happy about that result.
Moving into Wild Turkey, I really like this chart because I think it visualizes really well the journey of this brand with two different elements. One is our visitor center. We just reopened on May 1st, the renovated, what we call Jimmy Russell Wild Turkey Experience, which is our visitor center name in honor of the legendary master distiller. I think you can see the quality of this destination is a must-visit stop in the Bourbon Trail with breathtaking views overlooking the Kentucky River. The second one is Russell’s Reserve, 15 years old, which we just launched. You look at the quality of this liquid and brand and SKU, and it has all the rights to compete with any other luxury brand in the whiskey space.
I will say, if you look at where we started with this brand, Wild Turkey, years ago, which was much more of a mainstream brand. I've been told when we visited for the first time the visitor center and the factory, unlike Courvoisier, we were not necessarily excited about the quality of what we have seen. Today, this is really becoming a brand that has all the ingredients to become a very premium brand in the whiskey space. The direction that we see is very positive. Last but not least, it's a bit of, if you like, a new element versus the usual content we share. As you know, we're pretty single-minded in not being trapped in the temptation to launch too many RTDs and flavors across the globe.
Our focus is very selectively on RTD premium profit pools and very much in link with our drink strategy for any given brand that we decide to activate. So within that, we decided to launch in Australia Espolòn RTDs, and this is in consistency with our Espolòn drink strategy, the Paloma, and then the Margarita. And so far, we just launched in July. The trade reception has been incredibly positive, so we hope consumers will follow right away. And then we launched in Japan, Wild Turkey Highball, a premium price versus the competition. It was a pilot this year, and the results of the pilot were extremely positive. So we're going to make this also a permanent play from the end of this year in Japan, possibly with some further announcements in the premiumness of the proposition.
Just to say something that, as you know, a category that we consider not always in a totally positive light, but when it makes sense, we are also active, and we believe we do good things. Before I pass on to Paolo, just a few words on Courvoisier. Look, the integration is going well. It's going according to plan. From a supply chain, IT, admin, logistics, everything has been completed and went really well. We're integrating the brand into commercial platform, and everything is also going well. We're live in all markets. We're selling and invoicing in all markets. We're now completed. We have now completed the global team that will look after this brand with some senior appointments. And we're very pleased about the people that are now part of that team.
But we are also hiring, and we're almost done with hiring also in the couple of markets, especially U.S. and China, where we say we wanted to hire some additional people focused specifically on either South of China or African-American in the U.S. And the new team is really looking at the brand in every possible way to understand how to really restart the growth for this brand starting from next year. And then in the medium-long term, we build this brand as a luxury brand in the cognac category as it deserves to be. As you know, H2 is going to be a transition period where we integrate the brand and we look at understanding as we go the full impact of H2.
But medium term, I need to say that so far, the team is really positive, and we're all pretty excited about the opportunity that we see with this brand. And overall, I will say in the medium term with the category as well. I will pass to Paolo, bridging with this picture, which is just something we also recently launched, which is the new line which we call the Garden of Splendor of Glen Grant with the 25-year-old and 30-year-old that are completing the range, which again is showing that the brand today is in a totally different place versus a few years ago. And I think this is going to be, in the medium term, another successful brand transformation story that we have up our sleeves.
So if you follow me to page 20, a few slides before we go back to conclusion and outlook, and we open for the Q&A session. Page 20, you can see that the EBIT adjusted in organic terms is growing value by 2.1% with a margin of 23.6% and 40 basis points organic dilution. If you look at the second quarter in isolation, we had a sequential improvement of both net sales and EBIT, which showed an organic growth of 6.9% and 5.6%, respectively, with still 30 basis points EBIT margin dilution in the second quarter on a standalone basis. Now, on a year-to-date basis, gross profit was up 3.4% with 30 basis points dilution. In the second quarter, the gross profit organically was down in margin as a percentage of revenues by 60 basis points.
The dilution of gross profit as a percentage of revenues was entirely due to the negative mix effect coming from both the fast growth of Espolòn, that, as we all know, comes with dilutive gross marginal revenues, as well as the impact of very poor weather conditions in EMEA, negatively impacting the high margin aperitifs in the second quarter. On the other hand, if you look at pricing and COGS, the positive pricing impact, which was, as we said, skewed into the first quarter of the year, still on a year-to-date basis, fully offset the tiny inflation, which is still there, which was largely driven by the negative carry-forward effect of last year's high-cost stock that we've partly utilized in the first half of this year. Now, if you look at the A&P, it grew in value by 2.1% with 30 basis points margin accretion.
In the second quarter, the accretion was consistent at 40 basis points due to the very poor weather conditions that negatively impacted the second quarter and the start of the summer activations as a consequence of that. The SG&A were up 6% with 40 basis points margin dilution. In the second quarter, the dilution was more minute at 10 basis points, reflecting the ongoing investments to ensure sustainable growth. On a reported basis, the EBIT adjusted grew by 0.1% with a negative perimeter effect of 0.5% in value and 40 basis points dilution due to the negative effect of agency brand, which were partly offset by the first-time consolidation of Courvoisier. Also, the effect were negative in value by 1.5% with 20 basis points dilution. And again, this is the tail-end effect of the revaluation of the Mexican pesos versus both the US dollar and the euro.
EBIT adjusted on a reported basis came in at EUR 418.8 million with a value growth of 1.9%, which was driven by a healthy 3.5% organic growth, a negative 0.2% perimeter effect, and again, a negative 1.4% foreign exchange effect. If we move on to the following page, segment analysis and review of EBIT by geography, Americas, which accounts for 44.9% of the overall group EBIT, the increase of EBIT organically in value accounted for 6.5% with a tiny margin dilution of 10 basis points, which was driven by a gross margin accretion of 10 basis points, where the favorable pricing impact in both Brazil and Jamaica was more than offsetting the COGS inflation and the negative mix effect due to the huge rise of Espolon bringing low gross margin on profits on revenues. The A&P in Americas was accretive by 50 basis points due to phasing.
The SG&A in Americas were diluted by 70 basis points due to the ongoing investments in commercial and marketing infrastructure build-up. In the EMEA region, which accounts for 56.5% of the group profit, the EBIT organic growth accounted for 3.6% with a margin accretion of 10 basis points, which was driven by a gross margin dilution of 70 basis points due to less favorable sales mix, as we said before, due to a soft performance of high margin aperitifs, which were impacted by very poor weather conditions, particularly in Italy and a few other European countries. The A&P was accretive by 30 basis points, mainly due to delay in start of summer activations. The SG&A, on the contrary, were accretive by 50 basis points driven by the phasing of build-up investments.
In the APAC region, which accounts for -1.5% of the group overall profit, we had a dilution of 960 basis points, which was driven by a dilution of 60 basis points at the level of gross profit with favorable sales mix more than offset by tough comp-based effect from H1 of last year. The A&P and the SG&A were impacted by robust activation and phasing of investments in new route-to-market capabilities in the region to support the accelerated growth going forward. And those two cost lines, the A&P and SG&A, created a dilution of 18,730 basis points. If you move on to page 22, other operating adjustments, which were primarily related to the Courvoisier acquisition, accounted for EUR 24. The structuring of the Courvoisier acquisition accounted for EUR 24.4 million in the first half.
The total financial expenses came in at EUR 33 million with a tiny increase versus a year ago of EUR 0.6 million. The exchange gains accounted for EUR 0.8 million versus exchange losses of first half of last year of EUR 10.5 million, with significant benefits from low volatility in exchange rates. Now, if we exclude the tiny exchange gains of EUR 0.8 million, the financial expenses came in at EUR 33.8 million versus EUR 21.9 million of last year, driven by a higher average net debt amount, EUR 1.9 billion this year versus EUR 1.7 billion last year, due to the closing of the Courvoisier acquisition in the first half of this year, and the higher and secondarily the higher average cost of funding following, on one end, the redemption of mature bonds at low rates and the refinancing of those in a higher rate environment.
Those were partly offset by the benefit of temporary high cash at hand ahead of Courvoisier closing and debt repayments. The average cost of net debt, the coupon for the first half, came in at 3.7%, so 1% higher than a year ago at 2.6%. Hyperinflation effects, this is Argentina, this is accounting and remeasurements driving EUR 10.2 million of positive contribution to the bottom line. The adjusted pre-tax profit came in at EUR 333.3 million, up 2.2%, and the pre-tax profit clean came in at EUR 310.7 million, flat versus a year ago. If we move on to the following page 23, taxation came in at EUR 94.1 million on a reported basis with recurring income taxes equal to EUR 97.4 million.
The net profit adjusted came in at EUR 239 million, up 2.2%, where the recurring tax rate stood at 29.2% in the first half, actually up 110 basis points versus a year ago due to the unfavorable country mix. The deferred taxes related to the amortization of brands for tax purposes amounted to EUR 8.2 million in the first half of this year, down EUR 2.7 million versus a year ago, and mainly due to the completion of the amortization of selected trademarks. Excluding the impact on non-cash component linked to deferred taxes, the recurring cash tax rate came in at 26.7% in H1, showing an increase of 200 basis points versus a year ago due to the combination of the two effects, the increase in recurring tax rate and the decrease of deferred taxes, but this is in line with what we have already anticipated.
The group net profit reported came in at EUR 219.7 million, up 1.3%, basic earnings per share adjusted at EUR 0.2 per share, down 4.2%, basic earnings per share at EUR 0.18. If we move on to the following page, 24, we can see quite a remarkable improvement in recurring cash flow from operating activities before working capital changes. It came in at EUR 395 million in the first half, up EUR 54.8 million or 16.1% versus a year ago. That was due to an increase in EBIT of EUR 7.8 million and a reduction in tax paid due to, mainly, this is phasing, pure phasing of tax payment cycles across the year in the different jurisdictions.
The recurring free cash flow, excluding basically the extraordinary CapEx, was positive at EUR 130.8 million, up EUR 222.4 million versus a year ago when recurring cash flow came in at a negative EUR 91.7 million. The increase of operating working capital in the first half accounted for EUR 190.9 million, but that increase was significantly lower than the increase the group registered a year ago of EUR 372.1 million. Net interest paid at EUR 26 million, marginally higher than a year ago, by EUR 7.5 million due to the additional funding for the Courvoisier acquisitions. Excluding, as I said, the extraordinary CapEx, the maintenance CapEx came in at EUR 47.5 million, EUR 6 million ahead of last year.
Now, if you look at the extraordinary CapEx, that is basically the difference between total reported CapEx of EUR 219 million and the maintenance CapEx, the extraordinary CapEx in the first half accounted for EUR 171.5 million, and those were mainly related to the production capacity expansion projects that we've announced, remaining EUR 550 million over 2024 and 2025, as well as the new headquarters building payment that accounted for EUR 93 million in the first half. The investments in extraordinary CapEx are expected to continue as planned in the remainder of this year as well as next year. And thereafter, we're done with extraordinary CapEx. Operating working capital, page 25, as a percentage of net sales at the back end of June came in at 44.2% on a like-for-like basis, so excluding Courvoisier, versus 37.9% of December last year and 39.1% at June of last year.
Operating Working Capital increase in the first half accounted for EUR 648.5 million, of which the organic increase accounted for EUR 190.9 million, with inventory growing by EUR 53.8 million, and that was primarily driven by an increase of EUR 40 million in aging liquid. But still, the finished goods inventory increased by EUR 10 million, driven by softer demand on aperitifs due to poor weather in Q2, limiting the reduction of finished goods. So this is where in the Q&A we may elaborate a little bit more, but this is where we're not exactly on track with the reduction of finished goods inventory that we will manage to achieve in the second half of this year. Changes in receivables and payables accounting for EUR 120 million and EUR 16.8 million, respectively, are both in line with the seasonal trends.
The perimeter effect, that is basically the first-time consolidation of Courvoisier, accounted for a step-up in operating working capital of EUR 439.9 million, with a prevailing component due to the maturing inventory, which accounts for EUR 388 million. The foreign exchange impact accounted in the first half for EUR 17.7 million, and it was mainly driven by the evaluation of dollar and pounds. If we move on to page 26, net financial debt came in at EUR 2,553 million at that June end, up EUR 699.7 million versus December and last year, reflecting the negative reported free cash flow of EUR 60 million, large due to cash absorption related to the extraordinary capital expenditures of EUR 171.5 million, which I've just mentioned before, as well as the dividend payment of EUR 78 million and the net impact of the Courvoisier acquisition, which was, as I said, a big cash outlay.
Cash and cash equivalents at the back end of June stood at EUR 555 million, marginally down versus December of last year, as the financing for the Courvoisier acquisition has been fully sorted out. The long-term euro bonds and term loan amounted to EUR 2.2 billion, EUR 375 million, with an average coupon of 3.66%. On a reporting basis, net debt to EBITDA ratio came in at 3.5 times, and this is including the earn-out and put option for a total amount of EUR 333.6 million, so the existing one as well as the ones related to the acquisition of Courvoisier. That is about it on numbers, so I would happily han d back to Matteo for conclusion and output.
Thank you, Paolo.
So I think we gave quite a lot of details already, but again, to reiterate, we believe we have reason to be happy about our first half with a solid performance of about 4% and 7% in Q2, which is very much outperforming the industry and is very much driven by aperitif, Aperol, and Espolòn. So I will reiterate, really driven by a couple of brands that are two of the best-performing brands in the industry, which is giving us a lot of also confidence that for the remainder of the year, we can continue to outperform the industry, leveraging those strong brands in growing categories. Obviously, the market is still volatile. There is a soft environment. This can remain reasonably soft in the U.S., and hopefully, we're going to be less dependent on weather for the balance of the year after August in Europe.
But at the same time, we keep seeing that we can outperform by a couple of points the industry and yet still growing, which is great. On a full-year basis, we need to flag that our ability to expand gross margin might be impacted by the mix, which we hope is going to turn positive already from July, but let's be clear, unless something really exceptional happens, we're not going to recover the mix dilution we had in May and June, which is also waiting on some higher cost inventory to deplete on aperitif. And then Paolo will expand on some aggregate supply contract renewals hurdles, which we're now addressing. So in a way, like I said at the beginning, we're braving the elements, a rainy Q2 and some tailored inflation, and yet we're doing, I believe, a great job.
We're outperforming the industry, and for the medium term, we believe we can be really confident in underlying continued brand momentum for our key brand market combination. We see the opportunity to deliver consistent operating margin expansion, and obviously, we just need to face some temporary headwinds into this year impacting margins, but the medium-term outlook remains positive. So thank you very much, and I think we will open for questions now.
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 1 on their touch-tone telephone. To remove yourself from the question queue, please press Star and 2. We kindly ask you to use the handset when asking questions. Anyone who has a question may press Star and 1 at this time.
We will pause for a moment as participants are joining the queue. The first question is from Simon Hales with Citi. Please go ahead.
Thank you. Good afternoon, Matteo. Good afternoon, Paolo. So a couple of questions, perhaps not surprisingly. The first one is about the margin outlook, Paolo. What if you could just give a little bit more detail as to how you're thinking about that H2 gross margin development now compared to where we were earlier in the year when you gave guidance around those factors? I'm particularly keen to understand what's delaying the benefit of those lower agave prices. I think historically, you'd said we should expect to see a EUR 50 million benefit from lower agave, EUR 30 million in 2024, and the remaining EUR 20 million in 2025. How is that now phasing?
And also related to sort of COGS development, can you update us on where we are on renegotiation of your suppliers' supply contracts? So that was the first question. And then secondly, around sort of recent trading trends, clearly Q2 weather was a headwind versus expectations. Can you elaborate a little bit more, Matteo, on what you've seen in July to date? I think the weather's been much better in Italy so far this month, and how you're thinking about lapping through what should be an easy, theoretically at least, Q3 weather comp from last year. What's built into your H2 gross margin guidance expectations right now for summer weather trends through July and August into September?
Thank you, Simon, for the question, which I was somehow expecting. So let's start from the guidance.
So as we've positioned the guidance for this year, we said we think that if you look at pricing and COGS evolution for this year, the two should be fairly balanced with potentially some a little bit of tailwind accounting for roughly EUR 20 million by and large to be understood, to be better understood, depending on, as you correctly pointed out, agave and glass contract renegotiations. Now, if we look at what has happened in the first half, and particularly in the second quarter. So if we look at the first half, let's start from what is really working, that is pricing and COGS. Luckily enough, the COGS increase is no longer outpacing our ability to take price.
Even though for this year, we had given a moderate price increase guidance between 1%-2%, and even taking into consideration the exacerbated discounts, we're hitting our goal in terms of price increase. Eventually now, COGS are growing still in the low single digit if you look at the first half, but below price, and we're not suffering any dilution in terms of margin from price and COGS in the first half. Now, the problem comes in the second quarter on mix, which was clearly not evident in the first quarter, and it's clearly due to the combination of, as I said, very poor weather conditions negatively impacting our aperitifs in the EMEA region, as well as the still strong growth trajectory of the Espolòn brand, which, as we all know, is generating still in year 2024 some dilution to the overall group gross margin.
Now, this is why we think that if you look at the gross margin guidance, and then I will elaborate on agave contract renewal and glass contract renewal. If you look at the gross margin guidance for the full year, we think we will not be able to see to achieve gross margin expansion, which means that basically we're at this moment, our expectation is to reduce our gross margin by roughly, call it between EUR 20 million and EUR 25 million. This is our current best estimate, of which you can see basically three components. One is a permanent no, sorry, one is a temporary effect, and two are permanent. All of the three, they account for one-third, one-third, one-third, so call it 8 and 8. So the first one is the agave renegotiation. This is a negative impact, but this is phasing.
So we don't see at this stage anything in terms of contract renegotiation that is not leading to the landing that we were expecting for 2025. So it's more in a phasing between 2024 and 2025. While the other two factors are to be seen as permanent, and those are the sales mix due to poor weather condition, and the fact that due to performance of aperitifs below our expectations, the fixed production cost absorption is below what we were originally expecting. This is another 8. So we have the first one, which is agave permanent sales mix and fixed production cost absorption, as well as limited absorption of last year, very high cost inventory accounting for the remainder, and this is permanent. Vis-à-vis contract renewal, which is your last point, we think on agave, as I said, is stickier than expected, but we'll get it done.
On the glass supply, we managed to pocket some of the upside this year due to the early renegotiation of the contract, but we still believe there's more to come in year 2025, as we don't believe it's the maximum efficiency we can achieve on that front. So this hopefully answers your question in terms of price comps and mix for first half and what we see for the remainder of the year.
Okay. So when it comes to July and outlook for H2, well, as you know, we won't give a precise guidance for H2, and by the way, it will be quite difficult at the moment anyway, but I'm going to give you possibly some headlines in what we think. First of all, July. Yes. Well, what we can say in Europe now, we can say we're literally at the end of the month.
The weather has been good, and obviously, this is positive. So we're not going to complain about the weather when it comes to July. And performance-wise, we don't have yet sell-out numbers and things like that, but the feedback from the field is positive. The brands are moving, and especially in Italy, we see a lot of orange everywhere. Similarly, in London this weekend, we had news that it was good weather and a lot of orange in the city and so on and so forth. Trading conditions, not easy. I mean, to be honest, everyone in the industry is under pressure. Everyone is promoting and activating like hell. And especially in Europe, if there is one category that is doing well, it's aperitif, and everyone is trying to promote spritzes or aperitif. Everyone is trying to be an aperitif.
I also mentioned there is even a beer brand, which I'm not going to name, but you'll find it, that is now having an ad that is saying, "What about this great aperitivo time with our brand?" So this being said, what we see is basically, by the way, in some cases, proliferation of menus with a lot of different offerings, and then a lot of Aperol Spritzes consumed. So thank God there is a lot of brand call, especially in Italy. So overall, if weather continues, in Europe, we expect to see better trends. When it comes to sell-out, again, just to notice, to manage expectations, we'll see a softening in Germany, and this is literally linked to re-pipeline fill after the listing last year, which will pop up in our comp-based sell-out numbers, not sell-in, starting from July. U.S., look, same. U.S. at the moment is soft.
Even our industry partners are looking at H2, wondering how H2 shape is going to be. Everyone is expecting some sequential improvements due to a combination of interest rate cuts, elections, and things that can get consumer confidence and discretionary spending to resume a bit. Now, we've been growing in H1 with a reasonably flattish market. I would say it's slightly negative volume-wise and probably flattish value-wise. If the market improves, we believe we can grow faster. We also have a slightly easier comp base, definitely for Aperol, like I said, less for Grand Marnier, but overall, slightly easier. I need to say, when it comes to US, I was there for a number of days recently. Yes, also a lot of competition. But what I noticed is that unlike Europe, the softness of the market is making customers to focus even more on what is growing.
So polarizing choices when it comes to choosing what to promote and activate, which overall can favor us. And then for what it's worth, because it's still a small part of our business, I said before, we expect H2 to go back to positive in APAC. We discounted our route to market changes, and H2 should be positive.
Brilliant. Thank you ever so much.
You too.
The next question is from Andrea Pistacchi with Bank of America. Please go ahead.
Yes. Hi, Matteo, hi Paolo. Two or three things, please, from me, a bit following up on some of the things we've just discussed. So on the US now, the market is obviously soft, which you're saying you're outperforming. Nielsen has been pointing to quite a slowdown in your business in recent months.
I know it's far from being very representative, Nielsen, but a lot of the softness in Nielsen is particularly with Wild Turkey, Russell’s Reserve. And you were talking before about the plans, a strong brand equity. But in the short term, are you seeing anything there? And when you strip out various phasing effects, comps, etc., what is your sense of sort of the underlying performance that your business is delivering in the US now as we go into H2? And then maybe for Paolo, going back to the agave and the contracts that you're negotiating there, can you remind us of your agave purchases? How much is these long-term contracts versus spot versus your vertical integration? And what are you aiming for with these negotiations? I mean, agave prices have come, I mean, I think even well below 10.
So what sort of price are you hoping to secure there? And if I may, just this is also a bit of a clarification, Matteo, on what you were saying earlier on the more intense promotional environment, particularly in Europe, how is this, I mean, is this impacting you because how are you responding to this? Are you having to respond to some of these promotions, or is it effectively you're losing a bit of business that you otherwise would have been getting?
Sure. Sound there. Okay. So U.S. first. Look, when you look at U.S., we always try to look at both Nielsen and NABCA. None of them is precise. Often, we believe NABCA, from a channel standpoint, is a more accurate coverage of our performance.
But when you combine those, we continue to outperform, largely thanks to Espolòn, which keeps getting traction in tequila and Aperol that keeps growing with healthy double-digit momentum across both Nielsen and NABCA. You spotted rightly Wild Turkey, whose performance is a bit soft at the moment. Although when you look at SKU by SKU, there are a few elements to consider that are also, in a way, affecting also value share. One is, as you know, we've been driving this transformation of the brand, and we're definitely focusing on 101 and upwards, which means slightly higher price points. And that obviously can be part of a little bit of a slowdown of those price points across category in the US.
The second part is there is definitely a lot of effort in building brand equity at the top, which I think in the medium run will give great equity to the brand and will benefit also 101 and even 81, which won't be forgotten, by the way. It's just a temporary refocus to rebuild the equity of the brand, but we will go back to 81 with stronger plans. And that is everything that is from all the Maker's Mark and ultra-premium prestige price point of Wild Turkey. At the same time, if you look at the and by the way, 101 is gaining share, value share. Then if you look at Russell, you will see instead share-wise, there is a bit of slowing down, actually declining.
But this is also in line with the repositioning and also refocus on Russell in high-priced SKUs because we said it a number of times, we didn't have enough Russell to sell and to keep up with the demand in U.S. and outside of U.S. So we're trying to shift the focus on Russell in value versus volume, which is always on a short-term level might have some impact, but we believe it's the right thing to do. So what I will say on Bourbon, I will not worry about the future. We are pretty confident on our Bourbon game for the future. There is also on the performance a bit of a slowdown from Longbranch, which, as you know, we exited the partnership with Matthew McConaughey last year. So now we're re-looking into this brand without Matthew, and we have also a very interesting plan.
So on Wild Turkey and bourbon, I would say stay tuned, but we believe we are on the right track, although we have a bit of a flat momentum on this brand. Mybe before I pass to Paolo, I cover Europe. Look, Europe, I'm going to sound a bit like a broken record, but it's what we always say, especially when it comes to aperitifs. We don't believe to have a lot of price elasticity, and this has been proven by a couple of years of high single-digit price increases in a row that compounded gave double-digit price increases, and we didn't see any slowdown. But obviously, the more you have competition and aggressiveness, and the more is coming from all sides being fake, me-toos, gins, beer going into the territory, the more you really need to make sure your brand is staying very visible and top of mind.
So what we did is, number one, we repurposed some of the A&P we had on some of the minor brands in field activation. So we're doing even more small micro-events across both north, south, center, and now even south of Italy for Aperol especially to make sure that it's really staying top of mind and the liquid to lips and the orange wave continue. And we are probably slightly increasing the frequency of promo, not the intensity. And when I say increasing, by the way, it means also to go back to pre-pandemic periods, right? Because during pandemic, we really slowed down all promos because it wasn't necessary. So for now, this is what we're doing.
What that means net-net is that obviously we had soft price increases in Europe for the year, around 1%-2%, and probably what we're going to deliver is going to be more skewed into very low single-digit, more to 1 than to 2 because we're offsetting some of that with some incremental promo frequency.
Okay. Vis-à-vis the agave contract renegotiation, basically, it's a little bit complex, but I'll try to explain what we're trying to pursue. Basically, you have three types, different types of contracts. You have the long-term agreements, you have the short-term agreements, and then you have the co-investments with different structures. So the long-term agreements are the ones which have been negotiated when there was very severe scarcity of agave plants in the period of time when there was a huge imbalance between supply and demand, and demand was outstripping supply.
So those contracts have been negotiated at significantly higher prices vis-à-vis the current MXN 10 per kilo spot price. Then you have the second class that is the short-term contract agreement, and those have spot prices by definition. And then you have the co-investments. These are contracts where you basically take some of the risks of the agricultural operation management. And those contracts, they are basically, on average, the price for the agave is in line, if not marginally below the spot price.
Now, the point is the conundrum is, as we're renegotiating the long-term agreement, to make sure that with the strategic suppliers, the one who can really and have been loyal to the company in the past, providing the agave plants at prices where below the back-end spot price, we remain in business. We extend the contract at prices that are as close as possible to the current spot price with some color structures where basically we recognize a portion of the potential future increase in spot price, but to a certain limit. Because, of course, sooner or later, the price of agave will come back. On the spot, stays a spot, and co-investment is co-investment.
So the point of year 2024, given the fact that we are still confident of renegotiating the long-term agreement to the price that they have, price structure that they have just defined, is in terms of quantities, how much of the quantity is coming from spot long-term agreement and co-investment we pull to produce this year products. So it's more the weight of one versus the other. So at the beginning of the year, we said, if you look at last year, average cost per kilo of MXN 24-25 this year, in terms of procurement, not what goes into the P&L, we're targeting 15, which is a MXN 10 reduction, primarily coming from long-term agreements. That is where we have a little bit of delay. So we will not be able to pocket and target a certain this year.
Believing the 20 next year is more a little bit 8 moving into next year. But in terms of negotiation and everything, I think we're in a good spot. And then, of course, demand plays role because the more we ship, we sell Espolòn, the more we absorb last year high cost liquid that has been distilled and stored in 2023 at MXN 24 pesos. And so the sooner we get rid of that stock, the better it is for us because we would have in the P&L a cost of the agave that is as close as possible to the MXN 10 pesos per kilo that is the current spot price. I hope I've answered it. It's a little bit complicated, but it's marginally higher than the MXN 15 pesos per kilo that I have mentioned before.
Yeah, yeah. Very clear. Thanks, Paolo. Grazie.
The next question is from Cédric Lecasble with Stifel. Please go ahead.
Yes, good afternoon. Just to follow up on the consequence of the weak start of the Aperol season in Europe on your Q3 development, could you maybe explain the potential spillover impact, the start of season engagement, how fast you replenish, and how we should look at the phasing of Q2 and Q3? You mentioned weather conditions to explain softer potential margin in Q3. As if the weak start of the season would have a spillover impact on Q3. So any color on this would be very useful. Thank you.
I think on the weather conditions, the comment we made were relating to second quarter, not the third quarter of this year, which negatively impacted the sales mix.
Now, clearly, in order to achieve the flat gross margin that we've alluded, we need to have a good third quarter with positive weather conditions, which can deliver a little bit of gross margin uptick in mix. So this is the base case scenario that we have in mind at this stage.
Because if I may. July was that. [Crosstalk]
Sorry to interrupt, but the comps were pretty weak last year, especially in Italy. The weather conditions are pretty good since the beginning of July. So if you have very frequent replenishment, you shouldn't have too much impact on top line, and top line would drive the mix.
So should we understand that you still have the cost of the elevated COGS prices that you couldn't get rid of in your COGS in the products of finished goods in Q2, that you will sell in Q3, and that you will have this bite on the gross margin?
If I understand well, your question is more relating to the finished goods stock on hand that we have at the back end of June vis-à-vis our expectation to absorb the excessive stock that we built last year ahead of the change, the go-live of the investments of the new bottling lines in Novi Ligure. So if this is the question. So yes, it's confirmed. So basically, we were planning even the fact that we've given an indication vis-à-vis the possibility of fully absorbing the EUR 150 million finished goods increase that we had last year in year 2024.
We planned production counting on a stronger pickup of volumes in the aperitif business in the second quarter of this year, which was negatively affected by poor weather conditions. So we are not in a position yet of having done fully the job of reducing the operating working capital that will be implemented in the second half of this year, probably not to the extent of absorbing entirely the EUR 150 million, which is probably more now between second half of this year and first half of next year. But talking to the third quarter, it's still peak season for aperitifs. So the point is that in order to achieve the flat gross margin guidance, independently from the element of stocks, we need to have on hand, we need to have good weather conditions to deliver in the third quarter of this year positive sales mix affecting our gross margin.
If that is achieved, then we're in a good spot to hit the flat gross margin guidance that we've given. And so I think. Yeah. Yeah. I think the stock. Yeah. The stock on hand clearly is higher than what we hope. But of course, the stock of last year has been mainly depleted in first half. It's still high, but it's high with costs that have been the 2024 costs.
Thank you very much.
All right.
The next question is from Sanjeet Aujla with UBS. Please go ahead.
Hi, Matteo, Paolo. A couple from me, please. Firstly, I think in the past, Matteo, you've spoken about your belief that the business is capable of doing high single-digit growth when the industry is weak, when the industry is back to normal, you can do low double-digit.
I just wanted to gauge, just given the weaker Q2 from a weather perspective, whether you still think that high single-digit is a reasonable way to think about fiscal 2024 from an organic revenue standpoint at the group level. That's my first question. I just wanted to delve a little bit deeper into the pricing and promotional environment in the US. I think it's a topic we discussed in Q1. Just wanted to get a sense sequentially if you've seen a further escalation at all. And if so, which categories would you call out? My final question is just on Courvoisier, please. Do you have a sense of when you put together all of the noise around sell-out, sell-in, what sort of annualized net sales run rate would that brand be contributing in your opinion this year? Thank you.
Hi, Sanjit. Okay.
Both very tricky questions, which I'm going to try to answer without giving you too much because, of course, it's also not easy at this point, and we don't give guidance. But when it comes to high single-digit, low double-digit, I will say this is still the case. Of course, we always say we believe with normal market context or a soft market context, we are able to deliver high single-digit, and when the market is good, we're going to deliver low double-digit. Now, I think the open question is how the market is going to be in H2. I will say especially in the U.S. Now, do I believe we're going to be in between mid and high single digits for the full year? Personally, yes, I do.
But to what extent we're going to be closer to the bottom end of mid single digit and more towards the high single digit? I think it depends very much on the market, which, like I said, is very unpredictable. If you remember, in January, we said that we knew that Q1 in the US, well, for us also in Europe, but talking about staying in the US, in the US was going to be very soft. Q2 was going to still be problematic. And then there was a sentiment that Q3 will possibly improve, especially driven by pre-elections, and Q4 entering with momentum this season would be good. Now, this is not totally true anymore when we talk to the team and our partners. There is some still positive hope, but probably more of an expectation that things can get better from September going into Q4. We will see.
So I think the equation still stays, but I think we're still looking at H2 for U.S. to understand to what extent the single digit is going to be mid or a bit higher. When it comes to Courvoisier, that's tricky because we started to manage the brand very recently. There are markets where we are taking over the brand from the previous distributor, for instance, U.K., as we speak. There are markets that are pretty complex, like U.S. and China, and understanding not stocking the distributor, but stocking trade takes a little bit of time. So to be honest with you, something that we're trying to understand, also given the category volatility, especially in U.S. and China in the recent, let me say, 18-24 months, also ourselves is what is the right baseline to build our ambition.
Look, one message that I want to give about Courvoisier is that while we're pretty confident both about the short term and even more about the medium-long term, short term more tactically because we believe we have opportunities into next year in terms of mix pricing and some, and we believe also the category is probably now hitting the floor. We have seen some very soft positive initial data in July, especially in the U.S. on the category. This is a brand where we're going to do the right things. We're all about building a luxury brand in Cognac, aiming to be at the top in Cognac. And this is going to take patience. Now, do we have already all the luxury and Cognac capabilities in the company? No. But what we have and we historically had is patience and discipline.
There are two key ingredients to build luxury brands. And I think we'll get there. So possibly by end of the year, we're going to be or going more towards the end of the year, we're going to be more precise in terms of the baseline, but not yet at the moment.
Very good. Thank you.
The next question is from Edward Mundy with Jefferies. Please go ahead.
Afternoon, Matteo. Afternoon, Paolo. I've got a couple of questions on Aperol in the US. I think you demonstrated in the slides that it's seen really good momentum and a lot of popularity. I'd really like to double-click on that. So I mean, clearly, a big chunk of that is your execution activation in creating very strong consumer demand. But are you able to put your finger on why it's so popular and why it's really captured the imagination?
Is it the color? Is it the sort of connotation? Is it the sort of party drink? Is it the sessionability? I mean, what do you think that's really driving that popularity? That's the first part. The second part is, how's the brand being built differently relative to Europe? And then third of all, can you just remind us whether you've got enough Prosecco or whether there's enough Prosecco in the market to continue to fuel the demand for Aperol Spritz?
Look, the line was a bit on and off. So I think I got the first question, which is, US Aperol is doing well. Why do we think this is the case? I didn't catch the second part of the question. If you can repeat, please.
Sure. So yeah, why is it doing so well? Let me just change this. Is that better?
So, first question is, why is it doing well? Maybe you could provide some insights into it over and above your execution. Second of all, how is it being built differently relative to Europe? And third of all, is there enough Prosecco to go around to fuel that demand?
Yeah. Look, I think it's one answer that probably covers both questions because why it's so popular? We believe it's so popular because, as everywhere else, we execute according to our playbook, which is very clear. We are single-mindedly focused on one drink, which is Aperol Spritz. And the drink has some unique characteristics of image in a wine glass, orange captivating image. Sessionability is refreshing. It's sparkling. It's bittersweet. And it has a special taste. And we start in the on-premise, liquid to liquid events. And when people see other people drinking Aperol, they copy. And we activate through digital.
We A&Plify. This is where the orange wave starts. We have our growth model. This is a drink that in that respect also has equally in the U.S. quite a different consumption pattern and velocity versus other spirits because unlike well, in the U.S., maybe they would drink two or three. Maybe in Italy, one. But unlike other cocktails, it's not a two or three or one. It's more sessionable. It's closer to beer in terms of repeated consumption and number of drinks than to another cocktail Old Fashioned or a Negroni or whatever. When it comes to U.S., equally as we did in Italy, we're really focusing on city strategy. We started with particular focus on the coast initially in 2016, focusing New York, New Jersey, Florida, California, Vegas, Chicago, Boston. Those are the places where we're seeing the green dots in the map.
Now, slowly, we're expanding into other places. Although I need to say, even in California, I was there recently, we still have a lot of runway. We haven't yet started in other places. I don't think there is a lot of differences both in the model, in the execution, and in why it's successful. Maybe the one single difference could be price. Typically, in places like Italy, it's quite cheaper. It's offered often in combos with food and stuff, whereas in places like US, it's more sold at an affordable price, but more like a drink, not in a combo with food.
But other than that, basically, the algorithm we see is basically the same, which is why we're pretty bullish about the future of Aperol in the U.S. because we believe that we have all the similar partners we've seen in Europe, which means that not only we still have a big runway for growth in certain places, like for instance, I just mentioned California, but also then we have all the remaining states, state by state, city by city, to activate, putting more people on the ground, more investment.
And Prosecco, there's enough Prosecco to go around for that growth?
Y es. Yes. Very much so. Actually, there is a bit of a joke, if I need to be honest with you, in the company because Prosecco for us is dilutive, as you know, and it keeps growing double-digit.
We would prefer Prosecco not to grow that fast, but actually, it is growing. But with the investments we did in Novi across the board, across the factory, it wasn't an investment for Prosecco. It was an investment for aperitif. But we have as much capacity as we want. So I think there is no problem with Prosecco yet.
Great. Thank you.
The next question is from Mitch Collett with Deutsche Bank. Please go ahead.
Hi. I'd like to ask two questions, please. The first one for Paolo. Sorry to labor the point, but can you come back to the EUR 25 million of gross margin headwind? Is that an absolute number? And how should we think about gross margin in percentage terms for the second half? I appreciate it probably depends a bit on sales, but can you help us with that one?
Do you expect, therefore, EBIT margin for the year to be down based on what you're seeing right now? Then my second question is on the competition in spritzes. It sort of feels like it's nothing new. I remember a decade ago, the success of the Hugo was cited as an issue. Is there anything different about the competition you're seeing within the aperitif space? Is there any reason why right now, potentially, your competition for aperitifs might be taking share from either Aperol or CA&Pari? Thank you.
Vis-à-vis your first question on the EUR 25 million headwinds, it's the reference point where there is the misunderstanding. To be clear, we are targeting a flat gross margin as a percentage of sales for the full year.
So at this stage, we're not envisaging EUR 25 million dilution in terms of gross margin, which means that we count on a solid delivery in third quarter to offset the first half 30 basis points margin dilution that we have at June. So that's the tar get.
Yes. Clearly, in terms of margin. Thank you. And sorry, on the EBIT margin point, I don't know if you can add color on that as well.
Yeah. In EBIT margin, clearly, we count on strong delivery of Q3 in peak season for the aperitif to reboot the A&P. There is a step-up in A&P in second half. And we're currently expecting SG&A to come flat as a percentage of revenues on the back of a strong set of results in top line.
Hi, Mitch.
Listen, when it comes to aperitif, I think number one, Aperol is not losing share anywhere, which is great for us despite the craze of spritzes and competition, which means in a nutshell that the pie is growing. The spritz pie is growing. Aperol, as a leader, is taking its more than fair share, I would say. Now, to be honest, also so far, we're not extremely anxious because all the rest is very fragmented. We can't see a clear competitor coming up. It's a lot of, like I said, me too, a lot of fake, unfortunately, as well in some markets like Italy and Germany. Now, there are a few markets like Germany. As you know, in Germany, Lillet started to grow really nicely a couple of years ago.
Then at some point, we realized also in that case, it was not really affecting Aperol growth, but it was more increasing the pie of that sort of occasion, which is why we decided to launch Sarti Rosa, targeting that profit pool, which was a similar profit pool to Hugo, so as winter spritz days. So all in all, I think the spritz occasion is enlarging. Aperol is not losing share in any markets. Keep growing. And when it comes to how do we respond to the fact that maybe even the spritz share in terms of share of throat in drink is increasing, we believe we have a great range we can leverage that goes, by the way, across the all-flavor palette. So Aperol spritz will always be the spritz and our flagship.
And like I said, we still believe we have a lot of growth coming from that brand. But then in Italy, we saw organically that CA&Pari spritz started to drink, to grow pretty fast with a more mature bitterness level for slightly older people, more into day and evening, and also associated with food. We recently seen in the northeast of Italy a brand that we have in the portfolio, which was in a way a little bit forgotten, which is Cynar. Cynar is growing really well. Basically, it is today what most of the local choose to drink, especially younger people, younger crowd, which is why we just announced a couple of weeks ago well, no, actually, last week, sponsorship of the Venezia soccer team, which Cynar, because we think there is a lot of young crowd following the team, and Cynar is really doing well.
So it's regional at the moment. And this is even more bitter for more discerning choices. Then we have Crodino, which is a non-alcoholic spritz, which is going to be a big play for us in the future. I spoke about Sarti with a sweeter, more female-oriented play, which is more going into the Lillet and Hugo taste profile. And then not to forget, we have Picon Bière, which is doing very nicely in France since we bought the brand. And we're piloting now this drink into a couple of other markets in Europe because we believe there could be an opportunity to expand beyond France and Belgium. So like I said, do we mean we're going to dilute our basically focus into a lot of brands on this occasion? No. Aperol is going to remain the flagship and the focus.
But we have a lot of tools to respond and to also benefit beyond Aperol from the Aperol Spritz sorry, from the Spritz vibe to grow.
Thank you both. Just quickly, Paolo, sorry to follow up, but gross margins flat, SG&A flat as a percentage of sales. Was it A&P flat as a percentage of sales, therefore EBIT margin broadly flat? Did I catch that right?
Yes.
Thank you.
The next question is from Trevor Stirling with Bernstein. Please go ahead.
Hi, Matteo. I'm better with Paolo. Two questions on my side, please. Paolo, looking forward to 2025, if we have the delayed benefit of the old stock that should be close to fully used up in 2024, we have, again, the delayed benefit of the agave and the renegotiation of the agave, and that's starting to come through, and potentially some upside from glass.
I mean, I'm not looking for guidance about 2025, but that does seem a very favorable setup for 2025 gross margins. And the second question is with direction specifically with Espolòn. When all of your renegotiations are finished on the agave, do you think Espolòn gross margins will be in line with group average, or will it continue to be dilutive?
Yeah. Vis-à-vis the expectation for gross margin 2025, yes, it's confirmed. We expect an accretion of gross margin in terms of revenues. All the elements are clearly there. Vis-à-vis Espolòn, yes, we think the goal still remains the one of achieving at least parity vis-à-vis group average gross margin for the brand. So it's a long way to go. We were targeting as an exit point back end of this year, but from what I've said, we're not yet there.
And of course, currencies and the Mexican pesos versus dollar effects plays a big role there, which in the past years, a couple of years, has been negative. But yes, so we think we will get there sometime in 2025. Super.
Thank you very much, Paolo.
You're welcome.
The next question is from Alessandro Tortora with Mediobanca. Please go ahead.
Yes, hi. Good afternoon to everybody. I have two questions. The first one relates to the working capital, overall working capital on sales evolution, considering, let's say, the second part of the year. Can you give us, let's say, any idea of which kind of normalization considering the 44% level on sales we saw in the first half? So just an idea of the trajectory we can assume for the second part. And then the second question is just, let's say, clarification on the perimeter effect.
I remember in the last conference call, you mentioned roughly EUR 10 million EBIT from, let's say, Courvoisier, but generally speaking about also the perimeter. Can you confirm to us that this is sti ll valid? Thanks.
Yeah. With regards to the evolution of operating working capital as a percentage of sales, given the fact that the traction in second quarter was not on aperitif, not as strong as we hoped, we were not able to fully achieve the target. The target was, if you take year 2023, landing 37.9% of revenues last 12 months, we've said that we should be in a position of reducing the operating working capital and bringing the ratio back to about 33% in December 2024. Now, probably it's a delicate balance because, of course, we need to slow down production at plants.
That is something you may want to do but not to the full extent because on one end, you have lower absorption of this production cost, and on the other end, you create frictions with the unions. So most likely, we will end up somewhere in between the 37.9% of last year and the target 33%, and the remainder will be achieved in the first half of next year.
Okay. Thanks.
The next question is from Paola Carboni with Equita. Please go ahead.
Yes. Hello. Hi. Good afternoon, everybody. Hi, Paolo and Matteo. I have a few questions. The first one is, again, on gross margin. Sorry to follow up on that.
Can you give us a bit more color on what you are implying in the flat margin guidance in terms of savings from the other input costs? You had mentioned potential profit pool of about EUR 15 million back in February. So I was wondering if that's still all implied in your flat margin guidance. Secondly, as far as your comments about July are concerned, just a clarification here. Have you experienced an improvement only in Europe or also across the board, and namely in the US? Third question, if I may, is instead on Courvoisier.
I understand it's tricky at this point to forecast contribution in terms of revenues, but at least based on what you might possibly invest behind the brand, both in terms of organization and marketing, can you give us a sense of where margin for the brand can land hopefully at the end of next year? Maybe we had in mind contribution of around 25%-27%. I don't know if this is something valuable also for next year or we should be aware of any more short-term effect. And sorry, very quickly, if you can share with us any update on your forecast guidance given the weakening of the Mexican peso in the last few weeks. Thank you.
So on the first question, which is saving from other input costs, aside of what I have just mentioned, the rest, the other factors that we have disclosed with A&Ple detail in.
As we announce the full year results, they are unchanged. So we've overall said we had for this year roughly EUR 18 million tailwinds and EUR 60 million headwinds, of which agave, as I said, was EUR 13 million this year and EUR 20 million next year, which now we're saying there is a phasing. There is another this is 8, and there is another 16, including worse-than-expected unabsorbed fixed cost that was costing us EUR 15 million. The safety stock absorption, this is phasing, negatively impacting 2024 first half but not second half. The higher depreciations are there to stay, EUR 15 million, and the aging liquid is there to stay. Then the other one is the negative mix that is there to stay, which is the EUR 8 million. So the other components are not destined to change.
So it's all in line with our previous expectations of just mention the elements that have to be seen as a point of difference vis-à-vis the original indications. You want to cover FX and close. The FX guidance for the full year is, at the moment, minute. In our numbers, we have a tiny positive contribution to the top line, 0.3%, and a tiny contribution to the bottom line, a positive 1.2%, within which we have the Mexican pesos where the significant portion of the revaluation of the pesos, of course, last year, the beginning of this year, which is then offset, but other currencies moving our direction.
So Paola, look, when it comes to Courvoisier, I'm sorry not to answer, but I said it before. I mean, the brand strategic assessment is underway.
We're going to be ready at the end of 2024 for the relaunch and rollout in 2025. We need to have a better grasp of the numbers. So I will just reiterate directionally the numbers we shared already at the beginning. So you might cover offline with Chiara if you have questions about what we said in the past. But we're not going to change anything so far because it would be premature. The managing director for the brand and for Cognac just joined, basically beginning of June. He's someone very senior, Augustin Dep ardon. He joined us. He did a couple of years in Moët, but then 27 years in Rémy Cointreau, always working on Cognac. He managed Louis XIII globally. He was head of comms globally for Rémy Martin. He managed some cluster of markets like UK, Ireland as a managing director.
So we're very confident about the leadership of Augustin for the brand. And through his stewardship, we'll get clarity as we go in the balance of the year. When it comes to July, yes, you got it correctly. Weather has been good. We don't have yet depletion data for Europe, but the feedback from the teams on the ground is that Europe was finally better and is positive. Depletions in U.S., last time I spoke to the team was 2, 3 days ago, so every day counts in U.S., but the outlook for the month was positive, depletion-wise. So yes, July seems to go well. Also, in APAC, Australia is finally in a good month, growing double digits versus last year. So also some positive news coming from Australia, which is the more, if you like, structured market. So we can see data when it comes to Asia-Pacific.
So July has been a good month. We believe it's going to be a month, let's say, according to our expectation for the balance of the year. Yeah. And by the way, I can see this is the last question. So something that I really forgot in my intro and I wanted to say is that it is definitely a challenging context. We have volatile macro environment and still industry headwinds. And again, we're outperforming and growing. So I just want to thank all our CA&Paristas because I know they are typically joining these calls and are also typically anxious about our share price because we think we deserve more. But you guys are doing a great job, so I wanted to thank everyone.
Thank you for the answers.
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Okay. Thank you very much, Dan. Thanks for joining the call, and see you all soon. Thank you. Bye-bye.
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