Good morning, everyone, and thank you for being with us this morning for Rémy Cointreau's full-year results. I am here with Éric Vallat, our CEO, and Luca Marotta, our CFO. Both of them will, of course, take you through the detailed results. As we present today our full-year results, I would like to open with a few words of perspective. The past year has been marked by a complex and rapidly evolving environment, macroeconomic volatility, geopolitical tensions, and temporary shifting consumer behavior, all of which are more cyclical than structural and closely tied to a context of constrained spending. Yet, in the face of these headwinds, we remained true to our long-term vision: building exceptional brands, preserving our unique terroirs, and enhancing the desirability of our portfolio. Let us not forget: Cognac has always evolved in long cycles. This is neither the first time nor the last.
Older historic Cognac families will tell you how it is important to stay the course during more difficult times. It is an essential condition for creating value over time. At Rémy Cointreau, we remain fully confident in the strength and relevance of our long-term strategy. Drink less but better is not a reaction; it is a conviction. Moderation is a structural trend, not a new one, and our value-driven model is built to embrace it. At Rémy Cointreau, we do not chase volume at any cost. This has been our stance for many decades and is one of Rémy Martin's greatest strengths. It is also what enables Louis XIII to stand the test of time, crossing centuries without losing its essence. We are tackling this challenging period with determination while also taking time for introspection.
Both are essential: confronting the crisis and, at the same time, reflecting on how we can improve and emerge stronger. With that in mind, I would like to take this opportunity to sincerely thank all of Rémy Cointreau's teams for their perseverance and daily efforts, always carried out with the same passion. The upcoming CEO transition will mark a new chapter, one of renewed energy and continued strategic focus. We are delighted to welcome Franck Marilly in a few weeks. His extensive experience in developing high-end international brands, his successful track record in business transformation, and his proven ability to innovate and accelerate brands will be key assets that enable him to meet the challenges ahead. Our fundamentals are strong, and our ambition remains unchanged: to create sustainable value through excellence, discipline, and long-term thinking. I will now let Éric take you to the full-year business review. Éric, the floor is yours.
Thank you, Marie-Amélie, and good morning, everyone. Thank you for joining us today. I will begin with a quick overview of full-year 2024-2025. Luca will then detail our financial results, and I will conclude by giving you an update of the group situation and the outlook, as usual. Let's begin with a review of our business performance for the year. I am now on slide five. Group sales reached EUR 984.6 million, representing an 18% organic decline. While this reflects the broader macroeconomic challenges, we took proactive steps to partially mitigate the impact by reducing costs, optimizing our operations, and enhancing efficiency. As a result, COP stood at EUR 217 million, down 13.5% on an organic basis. Despite the sharp decline in sales, the organic COP margin reached the high end of our guidance range, standing at 21.6%. This represents a deterioration of 3.9 percentage points organically.
Beyond the sharp decrease in sales, this performance was mostly driven by two factors. One, the gross margin. While it declined by one point, primarily due to cost-production inflation and a negative price mix effect, it remains at a high level, standing at 70.6%, which means 2.8 points versus 2020. This demonstrates the structural strength of our business model despite the challenging environment. Two, A&P expenses were reduced by 1.1 points versus last year, now accounting for 20.3% of sales, reflecting a more targeted and efficient approach to brand investments. We have obviously taken measures in the current tough context, making sure we keep the right balance. Following several years of acceleration, A&P is pausing, but from a high level. I am now moving on to slide six.
The purpose of this slide and the following ones is to share some key achievements and to analyze our relative performance versus peers. Looking at it for our key brands beyond the group results, which have been hugely impacted by our strong exposure to Cognac in the past two years. Let's start with Cognac, where we pride ourselves on having maintained our market shares worldwide despite a rather poor performance overall and a firm pricing policy in a challenging context. This inspires me three main high-level comments. First, Rémy Martin is a strong brand with a relevant positioning, and its relative performance has been driven by the smart use of new channels like e-commerce, particularly in China. Second, a good share of the headwinds Cognac is facing are cyclical, as already explained and detailed by our peers.
Third, we shall not deny that Cognac, as a category, is facing challenges in the U.S. while remaining very aspirational. We need to recruit beyond our existing core clientele, and we will achieve such through product innovation and new campaigns. Cointreau has benefited full speed from a wise and thoughtful investment behind the Margarita to leverage the growth of cocktails in the U.S. and worldwide. It has gained market shares, but the opportunity remains massive. We have a great liquid, and we are working on innovation to target new moments of consumption for the brand, particularly day occasions versus a strong focus today on the evening and the night. We could have shared the results of The Botanist as well, which are even more striking, even though from a much lower base, of course.
The Botanist is the brand which benefited the most from the portfolio strategy beyond Cognac, and it is now a creative for the group from a gross margin standpoint. Moving to slide seven and a crucial market, the U.S. Over the past two years, our company faced significant challenges which have strongly impacted our performance. Our recent performance seems to indicate that we have finally reached the bottom, and we believe this difficult phase is now behind us. From that low point, we have begun to rebound, and recent results show a clear recovery momentum throughout the year. Our key indicators are trending upward, confirming that the worst is past and that our strategic actions are starting to pay off. Throughout the downturn, we remained disciplined and focused on long-term strength. We maintained a rational pricing policy, refusing to engage in desperate price cuts just to chase short-term volume.
Despite this prudent approach, we have been steadily narrowing the gap with our competitors, as demonstrated by the two charts on the right. In other words, our strategy proves to be relevant. We are regaining ground in the market without compromising our margins or the premium value of our products. This combination of pricing discipline and competitive focus is positioning us for sustainable improvement as the market recovers. Our latest survey, which measures our brand's desirability, strongly supports this conviction. Rémy Martin is still the number two within the Cognac category. Moreover, we have made a substantial effort to reduce our inventory, particularly last year, with a destocking evaluated at EUR 60 million. Today, we can confidently state that the absolute value of our stock level is now significantly lower than it was in 1920.
This is why we consider that we enter the new fiscal year with stronger fundamentals, and we are reasonably confident that this positive momentum will continue in the coming months. Having said that, we are still waiting for the spark in depletions mentioned by Luca in previous meals. It would trigger the full-speed recovery as our stocks, which are low in absolute value, would all of a sudden appear too low in a number of months. We are not there yet, to be clear. I am now on slide eight. China has been, and by far, the country where we outperformed the most. Exo has gained market shares, but starting from a very low base and below our expectations. Our activations have been hit by the current macroeconomic context and its impact on the high end.
On the other hand, Club gained four percentage points of market shares in its own segment. An amazing performance in five years. This has been driven by the liquid and the iconic shape of the bottle, which fits perfectly Chinese taste and symbols. It has been amplified massively by a very smart and intense packaging animation and e-commerce roadmap. This has been made possible thanks to the decision we took four years ago to drive part of product innovation directly in China, and thanks to the strengthening of the e-commerce team over time with a very entrepreneurial mindset. Talking about e-commerce, we managed to grow 12% last year and have now reached and secured the number one position among imported spirits, far ahead of Baidu. One last word on the desirability of Rémy Martin in China.
As part of our last survey, one output is that Cognac remains a very attractive category. It is in the top three most desirable premium spirits categories, and Rémy Martin remains the solid number two Cognac brand since 2020. Another important achievement, and I am now on page nine, is this challenging environment has been the in-depth work we have done on cost to mitigate the impact of the top line on profitability. Over the past two years, we have implemented a series of targeted measures to address this issue. In the 2023-2024 fiscal year, we achieved savings of EUR 145 million. This year, or last year, 2024-2025, we continued our efforts, reaching EUR 85 million in savings. In total, this amounts to EUR 230 million saved over two years. Focusing on structural savings only, we have made significant progress in reducing our total cost base by 12% compared to two years ago.
In addition to these cost reductions, we have also taken a gradual and considered approach to optimizing our workforce. Rather than making bold restructuring announcements, we have carefully managed our headcount reduction step by step, ensuring sustainability and minimizing disruption. Overall, we managed to reduce our total headcount by 9% compared to 2022-2023 and the peak, while taking the decision to reinforce our organization where we believe there is potential, notably in China beyond Guangdong, for instance, but I will get back to it later. Let me now highlight our progress on sustainability on slide 10. In 2024-2025, Rémy Cointreau made significant headway on the sustainable exception. Our transformation roadmap structured around three pillars: people, terroir, and time. This year, terroir stood out with visible and measurable impact. We achieved an A rating from CDP, Carbon Disclosure Project, Climate, and a B minus from CDP Water, reflecting external recognition.
Carbon emissions were down 12% versus 2021, our reference baseline, keeping us firmly on track to meet our 2030 SBTI targets. While reduced production volumes played a role, the results also reflect key drivers, including operational improvements and supplier engagement, especially on packaging, leading to a 23% cut in emissions per bottle. All our new packaging is now eco-designed. We aim to reach the lightest weight possible and use only CSR-friendly materials. Transport-related emissions were also reduced by 18% per bottle transported. We also made major strides on water use. Net water consumption fell by 53% versus 2022-2023, which is massive, equivalent to a 39% drop per bottle produced. These savings came from a robust program across the value chain, including better water treatment, leak management, and rainwater harvesting. Finally, in Cognac, we launched the Center Pact, a bold step in favor of agroecology.
By March 25, over 42% of our wine-growing partners had already been trained in sustainable practices. I am now done with my first part, coming back to last year, and I will now give the mic to Luca, who will be more specific on financials.
Thank you, Éric. Now, let's move on to a detailed analysis of the financial statement. Let's start with the full-year income statement, the P&L. As previously mentioned, organic sales were down 18%. Based on this, gross profit decreased by 19.2% in organic terms, implying one point less, so a deterioration in gross margin, though this still represents a strong improvement of 2.8 to 180 basis points on a five-year period. This full-year performance reflects an unfavorable evolution in COGS, as well as a negative price mix effect, of which pricing contribution was slightly negative as expected. Sales and marketing expenses were down 16% organically.
While we have reduced some investment in the current context, spending remains in line with pre-COVID levels. Inside, within this total, we have to split into different souls. A&P expenses were down 22.3% organically, still representing more than 20%, 20.3% of sales. So an increase organically of 2.4 percentage points over a five-year period. As part of our optimization efforts, we increased the share of below-the-line specific point-of-sale spending relative to the above-the-line, more general brand awareness spending during this period. As a consequence, the below-the-line investment share, POS advertising, animation, activation, more volume-oriented promotional activities is now bigger to the above-the-line spending. What is above-the-line? Traditional media, digital, and PR. This is also there to speed up at the maximum depletion, the best approach of sellout. Additionally, digital represented 60%, more or less two-thirds of the above-the-line.
We can say that digitally, the group is spending 30% of the total A&P in digital. There is another line, which is the distribution cost, decreased by 6.2% organically year on year, mainly due to the restructuring efforts made in the U.S. and Europe last year, which are now as guided as expected, generating saving this year. The year just ended in 2024-2025. Over a more wide period of a five-year period, these distribution costs are now down 11.3% in absolute terms. What does it mean? That distribution costs have been decreased two times faster than top-line decrease. There is a third line. Administrative expenses were down 2.5% on organic basis year on year, reflecting a series of overhead cost optimization in response in answer to the current economic condition, which I will detail shortly.
Over a longer five-year period, this cost increased by 13.7%, reflecting two different dynamics: a strong decrease in holding costs, but a bigger increase than that in marketing and staff costs behind essentially several future growth-oriented brands that today are strong investment, but with the top line, which is not yet at the point we expected. Overall, the current operating profit is now down, was down 30.5% organically, as Éric pointed out, and 28.7% on a reported basis. Small benefit on forex. Important to notice this year because next year will be another story, as you have seen, after accounting for a positive currency impact of EUR 5.6 million. Operating profit margins to the 22%, down 3.5 percentage points as reported, and down 3.9 percentage points organically. The sharp decrease in sales alongside the cleaning gross margin were partially offset, but not totally, but additional cost reduction.
Now, let's take a look at the group current operating margin bridge, slide number 13. It was down, as said, 3.5 points as reported, reaching 22%. This breaks down into an organic decrease of 3.9 and a positive currency effect of 0.4. But why 3.9 points of decrease? First of all, deterioration of the gross margin, which remains at the high level of 70.6% and clearly above 2019-2020 to 180 basis points. This was partially offset by a reduction in A&P spend, which remained at a level still bigger, significantly bigger and higher than pre-COVID level, along with further optimization in distribution and structure cost cumulated. In more detail, gross margin was down one point, impacted by inflation in COGS and unfavorable price mix effect.
Pricing was likely negative over the period, reflecting the slight adjustment made in Cognac, particularly on VSOP, as well as a more pragmatic approach, more volume-oriented on Lycos and Spirits brand pricing. A&P ratio decreased by 1.1%, primarily due to the optimization efforts such as prioritizing BTL spending over above the line. While we have made this cut, the reduction is relatively modest compared to the significant acceleration in spending over the past year. A&P still remains far bigger, I insist on that, of 240 basis points versus 1,920. Third, which is the negative factor on this specific year, is the ratio of distribution structure cost. That was up 4 percentage points, even if decreased by EUR 13.4 million in absolute terms, reflecting savings related to reorganization project last year, coupled with further cost control effort to mitigate the impact of the sharp sales decline.
Furthermore, this evolution of organic COG margin includes another round of cost saving, totaling more than guided. We guided for 50, now we totaled 85 this year, which I will detail in the next slide. Slide number 14. In October 2024, we announced, beyond stimulating our sales performance, that we decided to mitigate as much as possible the impact of these headwinds in top line with a very pragmatic, specific, tailor-made approach on cost, targeting more than EUR 50 million cost saving. Thanks to a very good, quite excellent execution of this plan, we overachieved once again this objective and reached EUR 85 million on a full-year basis, of which 75%, or three-fourths, of structural saving that will last. In parallel, 25% of total saving are one-off, and so they will automatically reverse in 2025-2026 P&L. What we have done, let's start with manufacturing logistic, which contributed to 5% of total saving.
All of them are structural. They will last forever and reflect on lasting effort optimization in production in Europe. Second, on A&P, which represented around 65% of total saving, and this included 20% of one-off saving spread across the globe, mainly in the Cognac division, with, of course, a bit more emphasis on a depressed U.S. market. Here, the objective, I insist, was to protect more BTL point-of-sales, volume-oriented, depletion-oriented spending, and be more selective this time, this year, on above-the-line and brand awareness-oriented expenses. We had 80% as a second factor inside A&P of structural saving, which corresponds to additional investment made over the past three, four years, and that will return now to a more normalized level relative to sales. If depletion and top line give signs of dynamism, clearly, we might reaccelerate because of the variable nature of this spending.
As a global comment, the level of 20% we reached is quite satisfying, more than enough to deny the actual top line. Third point, overheads, represented around 30%, so the missing part of total saving, mostly 50-50, 45% one-off, including saving linked to the variable compensation benefit, travel and expenses, and fees cut, and more structural saving, 55%, integrated the optimization made in our organization, reorganization in the US and Europe. All in all, the exceeding saving, EUR 35 million that we are now analyzing compared to the guidance, are mainly coming from what? First, A&P, mainly structural savings for 65%, quite logic. Top line at that time was not what they ended, but more in the highest brackets, -15% to -18%. We are at -18%, so we adjusted. Overheads for 30%, equally split between short-term and long-term. That's not enough on saving.
Looking back over the past two years, we made a total of EUR 230 million in cumulative savings. Focusing only on structural saving, the one that at the end truly matters because they're to last and stand, they account for around EUR 130 million or 55% of the total. What does it mean? A 12% reduction of our total cost base since 2022-2023. As an additional note, headcount had been reduced without any major global worldwide reorganization, which is not our style, by 9% over the same period. Now let's move to the remaining part of the income statement, page number 15. After the operating profit, we had other operating income expenses that are showing a negative value of EUR 6 million to be compared to minus EUR 12.8 million last year. What is behind that value?
Mainly the cost of restructuring operation in China that has been happened this year and that will help to mitigate the potential rising duties. As a result, operating profit came to EUR 211 million in 2024-2025, down 27.7% as reported. Financial charges increased, as expected, a little bit less than guided, if we want to point out, from EUR 38.5 million to EUR 42.6 million. I will go into that with more detail on this next slide. The reported tax rate increased from 27.4% last year to 28.6%, mainly due to an additional charge related to the exceptional corporate tax contribution in France linked to the 2025 French finance law. Stripping out non-recurring items, the effective tax rate was 27.2% to be compared to 27.1% last year. Basically the same flat tax rate.
At this stage, we expect a tax rate slightly above for 2025-2026, around 29%, including the year two of 1.5 points of exceptional contribution linked to the French law of finance. As a result, bottom line, net profit group share came in at EUR 121.2 million. So minus 34.4% on a reported basis. So a net margin of 12.3%, down 3.2 percentage points versus last year, but more or less flat versus 2019-2020. Earnings per share came out at EUR 2.36, down 35.3%, and minus 9% versus 2019-2020. Excluding non-recurring items, clean EPS stood at EUR 2.49. Now, let's move to the analysis of the EUR 6 million non-recurring items. Three components.
6 million net charges, which most include the cost of restructuring operation in China to help mitigate the potential rise in duties, plus 1.7 of positive non-recurring tax items linked to this charge, and 2.5 million EUR negative on net charges related to the exceptional corporate tax contribution in France. Slide number 17, some comment as already mentioned on net financial expenses, which amounted to 42.6 million EUR in 2024-2025 compared to 38.5, up 4.1 million, but better than our expectation, better than our guidance. Net debt servicing costs were up in absolute terms as a result of the 12 months integration of, if you remember, 380 million EUR private bond issuance, which has an average of 10-year maturity at a weighted interest rate of 5.58%. As a reminder, we issued this bond in September 2023.
As a consequence, also this prorata temporis effect, our cost of debt increased from 3.76 to 4.07. Net currency expenses decreased from a loss of EUR 2 million last year to a loss of EUR 1.3 million this year, primarily due to the hedging of inter-group intercompany financing. Last but not least, other financial expenses stood at EUR 7.6 million in 2024-2025. For the year 2025-2026, we expect our financial charges to increase to around EUR 55.0 million. Now, let's analyze one of the most important slides for us, which is the free cash flow generation and the net debt evolution on page 18. Free cash flow increased from EUR 13.8 million to EUR 19.2 million in 2024-2025, or from EUR 18.2 million to EUR 27.6 million if you want to exclude non-recurring items. This evolution reflects on one end a significant, important decrease in EBITDA offset by three major factors.
First, sharp reduction in tax outflows from EUR 88.4 million to EUR 19.9 million, clearly reflecting a lower net result, so less taxes, and a tax cash reduction related to overpayment in previous year. The second factor I would like to highlight is the CapEx outflow, which decreased by EUR 29.7 million, considering the cash protection and optimization measure that also in that field we implemented. Finally, total working capital, global working capital, while not being the main driver this year, shows early signs of long-term optimization. The outflow decreased by EUR 12.4 million, including a decrease of EUR 6.7 million related to the ODV and aging experience, and EUR 5.7 million reduction in other working capital outflows.
Overall, the evolution of this important indicator, total working capital, reflects a smaller increase in inventory compared to full year 2022-2024 in terms of finished goods, Cognac ODV, aged liquid and bulk, and raw materials and packaging elements, considering the current context, and a more important significant decrease of account receivable compared to full year 2022-2024. What does it mean? An inflow of EUR 25.7 million offset by a decrease in payables in line with a sharp slowdown in activity. In parallel, other cash outflows decreased by EUR 81.9 million, largely due to the optimization of the cash dividend last year, EUR 41 million versus EUR 152.7 million. As a result, at the end of March 2025, our net financial debt stood at EUR 675.4 million, up EUR 25.7 million from March 2024. As a consequence, a ratio is up from 1.68 March 2024 to 2.4 in March 2025.
Slide number 19, a new slide. Let's talk about free cash flow conversion, which is very peculiar as an indicator for our industry, particularly for players like us heavily exposed to aging inventories. The analysis of this evolution highlights a strong year-on-year volatility, primarily why? Because it is driven by changes in EBITDA. During the peak positive periods, 2021, for instance, free cash flow conversion reached 45%, supported by the initial COVID-driven business boom and a measured, little bit delayed level of ODV purchases. Following the year 2022-2021, free cash flow conversion stood at high level, but 24%, driven by the record high EBITDA of the group during the COVID peak, but partially offset by the reinforcement of our future ODV supply coverage and our investment behind the future growth.
We can say that our business, and for specific players like us with the weight of aged business, our business model includes some inertia due to the today purchases being made to support future growth. A more, if you want, normalized level, excluding both the positive effect of COVID and the current adverse context, will be in the range of 15%-20% of free cash flow conversion. We are not there this year. We will not be there next year, 2025-2026, either if tariffs in China or the US are confirmed. Clearly, they are too sword, waving too much also on these indicators for 2025-2026. In a normalized environment with steady EBITDA growth and continued optimization of cash behind our brands, ODV purchases, and CapEx, all the investment setup, this remains 15%-20%, a realistic normative target for the group.
Now, let's move on to the impact, a very technical slide, but it's more than ever necessary this year in 2025-2026. Currency hedges as slide number 20. The group reported this year in 2024-2025 a positive translation impact of EUR 5.7 million on sales, better than expected, and a positive transactional effect of EUR 5.6 million in COP in 2024-2025. This mainly reflects the evolution of the US dollar. Top line, bottom line, the same. It is accretive. It is positive compared to the organic P&L. Let's look at our forecast for 2025-2026. We talked about that already at the end of April, but it's important to rehearse and repeat. Why? This is particularly tough to estimate considering the strong volatility to the US dollar and more generally all the currencies this year.
This year, we have chosen to work on three scenarios on the US dollar mainly and the RMB, Chinese yuan currencies, which cover combined 85% of our aging needs. The best case scenario, $1.07 US dollar and RMB 7.60 for the Chinese yuan. The second one, which is the current case scenario, which is presented, $1.15 for US dollar and RMB 7.75. The worst case scenario, $1.25 or RMB 8.10. Focusing clearly, as has been highlighted on the current case scenario, we assume a conversion rate of $1.15 euro US dollar and RMB 7.75 euro RMB as well, this is conversion, as a hedged rate of $1.12, so better than $1.15 on euro US dollar and RMB 7.82, slightly worse on Chinese yuan.
In absolute value, we anticipate the following negative impact between EUR 30 million-EUR 35 million on sales, published sales compared to organic, mostly driven by a negative effect in H2 for two-thirds. And between minus EUR 10 million and minus EUR 15 million on operating profit, equally split more or less between H1, H2. You can read all the information on the slide of talking also about forex sensitive by currency at a yearly level. As the evolution of the euro-US dollar and, to a lesser extent, but it's there, of the euro-RMB exchange rate remained very volatile, we will continue to update to share with you in a very detailed, sometimes boring, but important for you to modelize also the published, even if we don't guide on published by the organic, and so give you an update every quarter.
At this stage for 2025-2026, what we have done, we have already covered 80% of our estimated net US dollar exposure, of which around 60% is option. On RMB, we have already covered 60% of our net Chinese RMB exposure, of which around 50%, 50 is option. Slide number 21. Now let's move over the balance sheet overview, where total assets and liabilities stood at EUR 3.42 billion, up EUR 53 million compared to March 2024. The left side, the assets, global inventory increased by EUR 133 million to reach EUR 2.1 billion due to the purchase of young ODV and increase in our inventory levels given the current context. Inventories now represent 61% total asset, up three points. It was 58% last year.
On the right side, on the liability side, shareholder equity is up by EUR 84 million, historically high, mainly driven by the net income, partially offset by the payment of the dividend related to the fiscal 2022-2024. The group's net to debt equity ratio, net gearing, is flat over the period at 35%. Always on the cash and return on investment side, let's move, as every year, at the ROCE slide number 22. Our ratio came in at 10.3% in 2024-2025, down, clearly down, 5.2 percentage points on a reported basis, and 5.5 percentage points in organic terms. This includes an organic decrease of 5.5 percentage points in ROCE of the group brands and the negative swing, as you can see, even if it's a minor absolute value in partner brands ROCE. Why that?
The ROCE evolution is the result of an asymmetry between organic increase of 7.6 in employed capital and a strong decline of 30.5 in COP as the group continued to invest for the future despite a challenging context over the short term. This is particularly the case for our biggest division, Cognac One. Its ROCE declined 6.3 percentage points, organic to 10.9 on the back of an increase of 8% in employed capital and a COP decline bigger than 30%, 32.4. In 2024-2025, the group continued to invest in aging inventory, slightly less than before, but still investing, and CapEx sticking to its long-term strategy. Other division, so Lacs and Spirits, ROCE decreased by 2.3 percentage points, organically to reach 12.4, bigger than Cognac. This evolution reflects continued investment behind our brands, with employed capital being up 6.2 organically, alongside a decrease of 10.5 in COP.
One word on employed capital, more closely in slide number 23. Overall amount increased by EUR 152.3 million, but the organic part, which is the important part, is EUR 148.9 million and a positive currency impact of EUR 3.5 million. On the organic side, we show you the 7.6% year-on-year increase in employed capital, reflecting a strong increase in aging inventories, 74% of the growth. In CapEx, less than 10%, so sign of strong moderation without giving up of the strategic view, as explained earlier on other inventories. Now, last word, slide number 24 from my side. Moving to the early dividend, given the short-term headwinds and our confidence for the coming years, an ordinary dividend of EUR 1.5 per share will be submitted for shareholder approval at the General Assembly on 22nd of July 2025. One euro will be proposed in cash and 0.5 with the option of payment in cash or shares.
Overall, total dividend equates to a payout of 60% based on a recurring APS of 249 and a yield of 2.22% on the average share price over the fiscal year, which was EUR 67.35. I'm done. Thank you.
Okay. Thank you, Luca. And I'm back. Let me now walk you through our outlook for the year ahead. Before diving into figures, I'd like to provide some context around the current environment and our expectations as far as we can, given the high level of uncertainty and the number of unresolved variables at this stage. As you've seen, our top priority is to return to top-line growth. At the same time, we are making sure we are well prepared with mitigation plans in place to address potential risks, particularly those linked to tariffs on both sides of the Atlantic.
Returning to top-line growth at group level will not happen without the US, where we firmly believe that the recovery in this market will unfold in two stages. First, we anticipate a technical rebound in selling before counting on a sellout improvement. This will be driven by a low base of comparison, a restocking effect given our current trade. Inventories are well below 2019-2020 levels and potentially some forward buying from wholesalers early in the year ahead of the possible implementation of higher tariffs. While our overall pricing principles remain intact, we are also taking a more agile approach to price management. In the current context, this means staying true to our value positioning while adapting tactically smartly where appropriate, ensuring our brands remain competitive and relevant without compromising our value strategy. This is all about finding the right balance. We are also counting on a strong innovation pipeline.
The examples shown on this slide are not exhaustive. Some key launches cannot yet be disclosed, but they will provide significant support for brands. This innovation strategy serves three key objectives. One, recruit new consumers. Two, build local relevance through tailored products. Three, enhance brand desirability with premium additions that further strengthen the high-end positioning of our portfolio. As you have seen from this slide 26, a lot of innovation is also coming from non-Cognac brands. You will not be surprised to see on slide 27 the non-Cognac business as another important lever to support our top-line recovery. Growing the non-Cognac brands has not been set as an objective because of the headwinds on Cognac. It was already a key priority when we shared the vision in 2020, removing the target of achieving 65% of our business above $50.
At that time, we implemented a new portfolio strategy, which benefited particularly some of our global priority brands. It has also been instrumental to the growth of some of our regional power brands, particularly Metaxa, whose footprint in Eastern Europe is quite strong. Our investments are focused on a selected number of countries to make sure we emerge with our activations. To list a few examples for Cointreau, we will focus on the U.S., the U.K., and China, leveraging the Margarita and the strong positioning in the cocktail universe. China has become the number three country now and displays a great potential driven among others by convenience stores, a new channel for us. This is very exciting, and this is why we are investing more.
For Metaxa, the year will be marked by a lot of activations and a new campaign with Greece at its heart, considering the strong appeal of the country worldwide. Here again, with a clear focus on a selected number of countries. For The Botanist, as you can tell from the picture, we are moving from a very white and clinic visual identity to a more colorful approach to maximize the visibility in store, particularly in travel retail. It will be supported by a new campaign and new activations, notably in the U.S. Lastly, for Bruichladdich, we will leverage liquid innovation designed for China and travel retail to keep rolling out our thoughtful campaign. Of course, we will make sure we keep the great momentum of the brand in Japan, where it has grown double-digit in the past two years.
As a result, we believe 20% of sales spent on A&P is an appropriate investment for our mature brands, the percentage being higher for rising star brands with little impact on the group. On top of products and brands, we also aim at better balancing our geographical footprint, accelerating growth outside of the U.S. and China. This is what the slide 28 is about. For the sake of time, I will not elaborate much, but I would be happy to take questions. We focus on three priorities, which could be split between short-term, medium-term, and long-term impact. This year, we have decided to allocate new resources to support growth beyond Guangdong, where the majority of our business is made today. We will focus on strategic cities in Fujian and the southwest, where we can leverage the strong awareness of Rémy Martin and where we are late versus our competitors.
We believe in a rather quick payback. The payback in Africa and Brazil will take longer, but we are already investing as we have potential to grow The Botanist and Cointreau in Brazil and Rémy Martin in Africa, where we plan to launch a new product. India will take even longer, but we are already on it, not only through the product innovation, as you saw from Saint-Rémy and Diwali, for instance. We are finalizing an RFP, and we expect it to be a game changer in the country. Also, the surveys we made highlighted the great potential of The Botanist combined. Combined with the lower tariffs expected in India for U.K. products, this is an opportunity we are determined to capture. We have assessed the potential impact of tariff increases in China and/or the U.S. for 2025-2026 on slide 29.
It is important to know that these estimates are based on the assumptions known to date, which remain unconfirmed. We continue to monitor the situation closely and will adapt our strategies as more concrete information becomes available. As of today, our best estimate of the maximum gross impact stands at approximately EUR 60 million for China and $40 million for the US. We expect to be able to compensate at least 35% of the total effects in both China and the US. This translates to a net impact estimated at a maximum, I insist, it's a maximum of EUR 40 million for China and $25 million for the US and COP. To achieve this level of compensation, we have initiated a comprehensive action plan focusing on critical levers such as inventory management, cost organization, and strategic pricing and promotion management.
These efforts are essential to minimizing the adverse effects of tariffs and maintaining our operational efficiency. The last lever related to pricing cannot yet be accurately modeled at this stage. The context remains too uncertain and volatile. We consider pricing as an additional source of mitigation, which is not factored in what you've seen there, but it is impossible to commit to a precise timeline or magnitude at this stage. More importantly, and beyond these actions, the most effective solution remains the return to top-line growth globally, particularly in our key markets, the U.S. and China. Boosting our revenue in these regions acts as a natural hedge to the cost pressures we face, further reinforcing our financial resilience. If top-line accelerates in line with our expectations, we would be able to offset two-thirds of the gross impact. On slide 30, one last important element before moving to the final guidance.
Beyond restoring top-line growth and given the fundamentals of our business model, maximizing cash generation is imperative. There are three key levers I would like to highlight today, which will not surprise you. The number one is working capital optimization. In recent years, we significantly increased our ODV purchases to prepare for the future, reaching a peak in 2022-2023. Since then, and in light of the current context, these purchases have gradually normalized, albeit in a measured way and in line with our multi-year contracts with wine growers. This year, most of those contracts are coming to an end, and we have decided to seize the opportunity to reduce our purchase volumes, considering the current market conditions and the stock levels we now hold. This reduction will represent between 25%-45% of initial volumes, depending on the nature of the contracts.
We will have a visible impact as early as the end of H1 2025-2026 in terms of off-balance sheet commitments, with the first cash impact expected by the end of the fiscal year, March 2026. As a result, strategic working capital outflows are expected to come in between EUR 90 million and EUR 100 million this year to be compared to a peak in 2022-2023 of EUR 150 million. The number two lever is CapEx discipline, a similar trajectory, of course, as that of ODV purchasing, with a peak reached in 2022-2023, followed by a normalization phase driven by a more selective approach. We expect investments to be between EUR 40 million and EUR 45 million this year. Lastly, shareholder return. Naturally, the goal is to maximize it to the extent possible.
As of today, a share buyback appears unlikely despite our current low stock price, as the board has chosen to preserve cash for operational needs. The board is applying the same approach to the dividend with a dual objective. On the one hand, ensuring a consistent and attractive policy over time, and on the other hand, maintaining a reasonable and performance-aligned stance. Accordingly, the board will propose at the upcoming general assembly a dividend of EUR 1.5. To conclude, let's now turn to slide 31 for a few comments on our guidance for 2025-2026. We have tried to be as precise as possible, although the environment remains unsettled. This is why we've chosen to present two scenarios with and without the impact of potential tariffs so you can better grasp the underlying trends. What do we know at this stage?
First, while the U.S. has not yet shown clear signs of a sustained rebound, no spark, comparables are now turning in our favor. Second, inventory levels are healthy in absolute value and even below what we used to carry before COVID. Finally, we are now operating in a more efficient and agile manner thanks to the transformations implemented over the past two years. Conversely, what remains uncertain? China clearly represents the biggest question mark. From here, anything can happen. The recovery could be swift if consumer confidence returns fueled by substantial household savings, but the rebound could also take more time. Last but not least, there is the matter of tariffs, still unresolved on both sides of the Atlantic and the Pacific, by the way.
Against this backdrop, we expect group sales to return to mid-single-digit organic growth, mainly supported by a strong technical rebound in the U.S. starting in Q1. That said, the year will see some phasing effects, particularly in the U.S. and China. As such, we expect to return to growth at group level in H2. Turning now to the outlook of the COP, we are presenting two scenarios. First, excluding tariffs in both China and the U.S., we expect COP to grow by high single- to low double-digit organically. Second, including EUR 65 million of potential maximum net impact linked to tariffs, Rémy Cointreau expects an organic decline in COP of mid- to high teens. Looking further ahead, we have taken the decision to withdraw our 2029-2030 objectives.
While these targets may still have been achievable, the persistent macroeconomic uncertainties, the volatile tariff landscape, as well as the lack of sellout recovery in the US, no longer provide the necessary conditions to guarantee it. This decision also reflects the fact that the new CEO will naturally define his own strategic roadmap while staying obviously aligned with the group long-term value-driven strategy. I would like now to thank you for your attention for this long introduction. We are now prepared to take your questions. Thank you very much.
Thank you. Ladies and gentlemen, if you would like to ask a question on today's call, please signal by pressing star one on your telephone keypad. In the interest of time, we kindly ask to limit yourselves to two questions only, please. Go again. That is star one for your questions today. Up first, we have a question from Trevor Stirling from Bernstein. Please go ahead. Your line is now open.
Good morning, Éric, Luca, and Marie-Amélie. Éric, before I dig live into questions, just to say, I wish you a fair farewell, bon voyage for the next chapter. I know the last couple of years have been very, very difficult, but thank you very much for your patience and always your clear explanations to all of us over those years. Any questions? I guess, Éric, returning to the U.S., which is probably the critical long-term question, you highlight that the underlying depletion trends are very close to flat. Do you think that corresponds to sellout, or is there still a bit of a gap between the sellout and the depletion trends in the U.S.? Also, if you could put whatever you think is true for Rémy Cointreau into the context of the Cognac category and the industry. The second question around sensitivities, I appreciate very much the scenarios you presented based on 20% tariffs on EU imports. Is it right to think that the sensitivity is around EUR 20 million of gross impact per 10% of tariff on EU?
Luca, you want to take the second one, and I take the first one. First, thank you very much, Trevor, for your words. Needless to say that your questions have made me improve as well over the past two years, so really appreciated our discussions. Taking your first question, so indeed, depletions are close to flat. They are still negative, but they are, let's say, mid-single-digit negative.
If we compare to the past two years we've been through, it's a real sequential improvement. This we can say for sure. Plus, it is interesting to note that if you look at VSOP, where we have taken actions, we are now close to flat, indeed, meaning slightly better than the trends I just shared, meaning also that our actions on pricing do have an impact. By the way, they are not yet all fully implemented. If you take, for instance, the small formats, where we want to come back to an index which provides more potential for the small formats, particularly the 35 centiliters, which in the current context of less purchasing power is the same consumption as that of the 75, you know the retailers can decide to keep some of the margin for themselves for a while and so on.
It is not yet fully implemented. We still expect some impact there. Having said that, it is too early to say that it is purely and solely driven by real and solely sellout. My view is that it is partly driven by also some of the actions we took on price, which are reasonable and so on, also have a limited impact in time. There is a positive impact once you implement them, but then people get used to it, and the dynamism is less. We are still waiting for the spark, and it is still too early to say that depletions and that sellout is back to growth or even flat. I do not know yet. What I am comfortable with in the U.S., and I will conclude with that, is first, our stock levels are very healthy today.
Over three years worldwide, we have destocked EUR 100 million, EUR 50 million driven by more depletions than pre-COVID over the five years, sorry, and EUR 50 million driven by the fact that we have less stocks than we used to have before. Our stocks are pretty healthy. Our comps are pretty low, so selling, we're quite confident. Depletion should be okay, as also driven by all these actions we are taking on VSOP and other products. Sellout will take a bit more time. It's hard to say when it will happen, but as many of our peers have shared, we believe that a good share of what is happening is cyclical, even though long-lasting.
For the second question, the answer is yes and no, because it's theoretically yes if it was in a vitro world without considering the phasing, the volumes, what we have already done in these months covering which kind of needs. The theoretical answer is yes, more or less 20 of gross impact. The more you go into the year, the less impact you have also because you have what you need. Theoretically, yes. Let me profit of your question also to elaborate to some of your potential question mark reaction. We highlighted the worst-case scenario, differentiating gross and net of the first set of measures of containment from 100 to 65, combining both China and the US.
If you look at the guidance before, so without tariff or with tariff, you highlight, this is not coherent with EUR 270 million, which is the bottom line of this year, minus 65. It is high double, low teens. Bigger than that. What does it mean that we are fighting, projecting to moderate these net impacts? Clearly also through volumes and sales, because the first, as I already said, weapon to try to offset the use world is to grow back again. We think we have all the elements to realize these objectives, starting with the mechanical strong restocking in the US. I repeat myself, the spark would finally be there, the acceleration will be huge, as you know, as you, Trevor, pointed out many times.
Can I just ask one follow-up then, Luca? The guidance without tariffs implies margin expansion next year, and you have roughly EUR 20 million of one-off costs which will recur and come back on the P&L. That is basically saying there is a lot of operating leverage under there that would help offset the return of those.
Yes. And ourselves, very low profile, but on a comparable basis, we are working to try to get to a flat, to low single-digit increase of the rates without this wade-off. We are working to, even if there is a strong burden compared to the size of top line of today, continue to be able to do, I think, a good job in terms of cost. Now the ball is more in the field of my dear colleagues of Comex in terms of top line, because at the end, costs are not touching the sky. We can do no miracles. I'm not a saint.
Understood, Luca. Thank you very much, Luca, and thank you, Éric.
Thank you. We're moving on to our next question now, which comes from Edward Mundy from Jefferies. Please go ahead. Your line is open.
Morning, Éric. Morning, Luca. Two questions for me, please. The first is on the Cognac category where we're still not yet seeing a spark. I'd just be interested in your views on sort of what is it that's required? Is it an affordability piece? Do we need a bit more mixability? Do you need a bit more freshness coming to the category? More liquid on lips or tops or revenues? Do we actually need to launch sort of lower-priced products, perhaps a VSOP, sorry, a VS+ to drive affordability? I'd just love your big picture views on what it is that's going to drive that spark for the Cognac category in the US. And then second, apologies if you sort of just partly answered this on Trevor's question, but just around the sensitivities of what can be mitigated on tariffs. I mean, if it's not a $100 million gross impact, would the amount that you can offset start to increase from 35% up to 50% or even more? I'd love to get your views on how much the net drop through would be if it's not quite as bad as expected on the tariff side.
Thank you. Ed, you'll take the second question, and I'll take the first one. You want to start this time? Okay. Cool. So on the first question and the Cognac category, I understand the question focuses on the US.
I don't believe that what is happening is purely and solely price-related. If you look at the trends in the US, it's across the board, except for tequila to a lesser extent and except for cocktails, that the depletions are negative. Unlike in China, by the way, the high-end is resisting better. I don't think it's purely and solely price-related. By the way, we've seen some of our peers decreasing their prices aggressively, and this did not translate into necessarily much more volumes. I believe, of course, in psychological prices. I believe in being below $50 for VSOP. I believe in being below $60 for 1738 because this has a psychological impact for sure, and this we know.
I also believe in the fact that making sure that every stakeholder in the value chain makes money so that everyone is highly motivated because we shall not forget that it's a very intermediated business. Pricing does have an importance and a role to play, particularly in this context. Of course, if we had a VS, we would do more volumes for sure, or a VS+. Our strategy is not to compete face-to-face with our competitors. In fact, if you look at our successes in the past five years, we have doubled the volume on 1738. We have doubled the volume on Club. Two SKUs which do not compare face-to-face, compete face-to-face with our peers. Two SKUs which are not necessarily cheap. It cannot be reduced to that. It doesn't mean we shouldn't be smart in pricing.
It doesn't mean we have a strong pricing power today. No. I believe the second challenge, to be honest, if you look at our depletions compared to five years ago, if you exclude VSOP, they're good. If you include VSOP, they are bad. We have a challenge with VSOP. As we explained many times, we are in the process of fixing it. It takes time. I think we are partly responsible for that because we've been placing so much effort behind 1738, and we believe that 1738 could serve as a halo brand to Rémy Martin, but it is not true. 1738 is a brand as such. VSOP is a different brand within the Rémy Martin umbrella, and we need to support it. This takes time, as I said, when we launched it a year ago, and it's still in progress.
I also believe that probably the biggest challenge, in fact, and it's a challenge for the category, and it's a challenge for VSOP and VS, probably, in my view, more particularly, is to recruit. Recruit beyond our historical clientele, which, by the way, is more impacted on VSOP and VS by the current macroeconomic environment than for the rest of our SKUs. 1738 is recruiting. VSOP is not recruiting and is relying on a clientele which is more Afro-American and more impacted by the current context. The question and the challenge is, how do we recruit beyond this clientele? This comes through liquid to lips, for sure, but this is not going to give you the scale. It is also through communication.
You will see us investing behind VSOP, not solely on pricing now, but also on communication at some point to rebuild desirability and to build it beyond our existing core clientele. Not that we are going to give up on this existing clientele. We currently have a number of activations around DJ and music in many cities. Recruitment is the key challenge, and it will come through a number of 360 actions that are being put in place. I think if we manage this properly, pricing together with the recovery of the purchasing power in the long term is not the main issue. Again, having a VS would drive more volumes, but we are not obsessed by the volumes as such, as you know, at Rémy. We believe there is a lot of value we can drive in the long run and turnover.
We can drive in the long run. We still have a very small share on Exo, and we still have a very small geographical footprint in China. There is still a lot we can do, and as well with the non-Cognac, of course.
You want me to precise what is between meetings? I think, as already said by Éric, if our top line assumptions are there, we think that we go beyond the 35% offsetting, reaching 50-60, even 65%. It depends also on the top line dynamics. It can be counterintuitive, but the more the top line will follow the budget scenario, recovering the stocking and dynamics in Europe with special attention on China, the more we will support this top line announcement. We will be more on the saving side if the top line is a little bit more tough than expected.
At the end, I can only repeat that there is a fork, which is what has been highlighted, which implies that our guidance is not counting to reduce bottom line of this year of EUR 65 million, and then you put on that plus 8% to plus 10%. It is a bit more bold than that because otherwise we'll have a sharper decline. Organically, you can count on us, and you can do the math. It is better than your first read. Negative point. No, no. Negative point. Important.
My question was clearly, sorry, the question was more if the anti-dumping is not 38%, but let's say 20%, and if the US tariff is not 20%, it's 10%, and therefore your great impact is not 60 and 40, China and the US, but maybe it's like 30 and 20. Is it still a drop through or mitigating factors of 35, or are mitigating factors start to increase?
We will adjust. We will adjust. We can say that all in all, without considering all the options, because I had to do a sensitivity test for all the options, but if one of those is there, consider also the fact that we need to support the strong volume recovery for this year and top line with a slight decline. Meaning that bottom line, even if it is growing, it will be growing a little bit less than the top line. I insist also what I answered before, maybe it was not your question. Your first thread of you all is a little bit more too much negative compared to what we have highlighted.
Because if you do the math, we are planning to compensate on that a bit more than EUR 35 million, also using the top line dynamics of this year expected. On the negative side, I put a lot of attention, a lot of disclosure on the forex. Forex has been a supporter this year, is more volatile, more complex. We will guide on organic, but for your model, it is important that you take that into account. Everything is clearly explained. Top line and bottom line.
Thank you. Now we move to a question from Andrea Pistacchi from Bank of America. Please go ahead. Your line is open.
Yes. Thank you very much. I also have two, please. The first one is on the midterm targets, which you have withdrawn. The 33% margin clearly looked difficult to achieve also given the tariff uncertainty. I think no surprise there. On top line, you were expecting to grow at high single digit, and most of the headwinds you're facing are cyclical. I think consensus, if we go out sort of two, three, four years, is around 6% for the long term. Now, I appreciate visibility is poor, but could you share thoughts on how you're thinking about top line longer term? Does that consensus seem reasonable? How you're thinking of the various moving parts? And then probably for Luca on a couple of things on cash flow, please. You're reducing, you were saying, your Eau de Vie contract volumes, and you've given us guidance for this year on strategic Eau de Vie investment at EUR 90-100 million. What is a more normalized long-term level of investment here once those benefits of the new contracts fully kick in? Also, if you could give us a longer-term CapEx level, please. Thank you very much.
Actually, Andrea, you are asking to shoot a plan before the plan. Top line, CapEx, educational. You're fine. You're Italian. I'll reply to the first question. First, as you know, even in 2020, when we shared our long-term vision, we never spoke of the top line growth. We spoke of gross margin. We spoke of COP percentage. Obviously, the visibility has not improved. It is making it more difficult today. What I can tell you is, as you've seen, indeed, we are ahead of the plan or in line on the gross margin front, slightly ahead still. We are indeed lagging behind because of the very low visibility on tariffs as well and the turnover on the COP.
The reason why it is withdrawn is not driven by the top line or not the top line achievement. It is more driven by the lack of visibility, by the risks linked to tariffs than by a risk as such linked to the top line, even though obviously we have lost one or two years. If you ask me my view on the potential, I still believe at least, but I cannot tell you the horizon. I still believe that we do have potential from where we are to grow in China, even though we've gained market share a lot lately. Reasons being, we're still very small imported spirits in total consumption. If you look backwards, China, in 2003, the imported spirits accounted for 0.2% of the spirits consumed. In 2022, it's only 1.2%. It is still very little.
Meanwhile, we've grown imported spirits 11% CAGR in these 20 years. The overall size of the cake has grown 30%. What it tells is that China, we're still a drop in the ocean, and there's still a lot we can achieve there. Cognac remains an attractive category. The U.S., of course, is very much dependent on the macroeconomic environment. I can tell you, confirm what Luca said, the day there is a spark, the day it starts recovering, the recovery would be massive in the U.S. because our stocks are very healthy. Too low in number of months in case of recovery. In that case, we would catch up a lot. When will that happen? It is very hard to tell.
Cash flow benefits of the new negotiation, as highlighted by Éric, there will be the first moment you will see something, it will be at the end of September, in which the off-balance sheet, consider all the debt, will be adjusted commitment. I expect to land something between EUR -80 million to EUR -100 million, considering the future commitment, so not over one year of the future year. As you know, it is a rolling picture representing the engagement of the company to buy in the future, not clearly linked to a specific year. Overall, used to be EUR 660 million, should be something between EUR 560 million-EUR 600 million. I cannot be more precise than that. What is the benefits on a specific first year should be between EUR 20 million-EUR 30 million, already encapsulating the guidance. What is the normative one? I cannot answer on that. It is a reaccelerating top line.
If it is something supporting top line on Cognac, back at plus 12-13 for two years, and then decelerating, clearly there will be some spike, as you have seen in the free cash flow conversion. I think that all in all, EUR 90 million-EUR 100 million this year overall, considering the actual footprint of brands, could be something to modelize, maybe EUR 10 million less. No more than that because reaccelerating, clearly, we are betting on that, will be there will be a consequence in terms of cash employment. CapEx, we can live with EUR 50 million so far for some years, even making some sacrifice, but without touching the DNA. Can be a bit more also if the market is not dynamizing itself as we expected because you need to store. You have some CapEx to store more of the.
The normative basis compared to our scenario, it is 50, maximum 60. We do not plan so far to be back at the 70-80 of two years ago. We were at a high level of performance. One point, Andrea, which is important. We cannot shoot a CAGR on top and bottom line today. Everything is changing. The tariff sword threat is so big, the Damocles sword is so big, and is also implying an impact on the gross margin as a first tool to the growth. All the P&L dynamics, also the cash, might change positively or negatively, even without considering the absolute value on a given year. That is the reason why it was the moment on top, also considering that if we are lacking of growth in some historical market, we need to speed up in some new one.
The new one has some characteristic that maybe are a little bit less accretive to the average of the profit and loss. Need to be digested also by the new boss that will come. We have his opinion clearly to take more than to account, the guide division. The new one that will be shoot, but I do not know when, will take into account not only this conjunctural specific element, but also the new footprint. The first tool, which is gross margin today, clearly, if tariffs are standing for five years, it is not only for Rémy Cointreau, for all the industry, is a change of the business model in terms of negative element because it gives you less money after you have sold a bottle. You have less money to spend.
You have to be more efficient, both in A&P, in overheads, and then 33% was no more achievable.
Very helpful. Thank you.
Thank you. From Redburn Atlantic, we now have Chris Pitchert with our next question. Please go ahead. Thank you.
Good morning, all. A couple of questions from me. Firstly, on the destocking benefit, you talked about EUR 60 million of destocking in fiscal 2025. I mean, that would account for 6% growth in this financial year if stock levels have hit the stable level. If we assume a gross margin in line with the group, that could be as much as a 20% benefit to EBIT. Is the messaging right that the underlying operating performance, even before tariffs, we're still seeing a structural reduction in margin as the non-structural savings come back? Just want to check I've got the drop-through right on destocking.
And then, sorry, to follow up on the strategic inventory question, in terms of those forward contracts, you have a commitment to buy in the future. Are you seeing any reduction in the planted area in, say, Grande and Petit Champagne? I.e., there may be just less available supply, which will put a lid on how much strategic inventory you need to buy or indeed can buy. Thank you.
First, you take the second? Yeah. Okay. So thanks, Pitchert, for your very easy question. Let me rephrase it. Tell me if I understood correctly. You are trying to see if the destocking automatic hypothesis overall of EUR 60 million is giving enough gross margin to offset the debt cat bones back, negatively speaking, on term of cost. Yes, it's accretive. Because the restocking will give much more than the short-term headwind on a vertical basis on P&L.
If you look line by line, clearly the restocking is not showing a decrease in overheads. On a vertical basis, this activity is accretive. Does it mean that we do not need to speed up investment? No, we need to speed up. The equation works only because we are trying to remain at a 20% A&P ratio, increasing, I insist, BTL dynamics, short-term money-oriented A&P compared to more noble, more long-term brand awareness spending. It is a shift inside that. Vertically, it will be an accretive impact. I am not able to estimate precisely, but at least 10% if you consider at least EUR 20 million. We pay the recurring cost with EUR 20 million more. If you want to take on the positive side, we are able.
If you take it on the negative side, if you are not able to restock, you can say we have a threat on that. Remember what I said in that point, if top line is more stressed, we can also activate some additional saving posture, even if we already cut EUR 230 million. Today, the guidance is based on the top line dynamics as well to increase this EUR 35 million of not offsetting of tariffs already there.
For the second question, you know there are two ways to reduce production. One is indeed less hectares of vines, and the other one is reducing the productivity per hectare. The productivity has gone from 14 plus hectoliters per hectare to, sorry, to now 7 plus. It is a sharp decrease already. This can be flexible and increased again in the future.
There is indeed, I looked at Google Translation to make sure I am translating properly from French to English, but there are two things that indeed are happening. One is we had some planting rights that we had negotiated with Europe that we are not exercising, that our wine growers are not exercising. This is more a non-growth of the hectares planted. You have the uprooting. This is where I looked at the translating of vines, which is happening indeed. Having said that, it is not happening at a big scale today, particularly in Petit and Grand Champagne. Just so you know, for instance, if you take Grand Champagne, when we negotiated hectares to plant as a region in Europe with Europe, in fact, Grand Champagne was already covered and there were no hectares negotiated more. Grand Champagne is still a sought-after cru.
I am not so much afraid. If your question behind is whether we are comfortable with our sourcing in the long run, despite this indeed very strong crisis in Cognac, the answer is yes. Because of the stocks we have on hand, but also because of the contracts we have secured with our wine growers. It is true that we have reduced by 25-45%, but we believe that both combined do not prevent us from being comfortable to achieve sustained growth for our Rémy Martin brand in the future.
Thank you very much.
Thank you. As a brief reminder, that is star one for your question today. We now move on to a question from Laurence Whyatt from Barclays. Please go ahead. Your line is open.
Hi. Good morning, Éric and Luca. Thanks very much for the question. I wonder, at the Q4 stage, you kind of gave us the level of stock across the world. Given we're a couple of months later on, I wonder if you could just update us on where we are in stock levels, particularly in the US. I think it was around four months when you gave the update last month at the end of the stock levels at the end of March. Secondly, in terms of marketing spend, you mentioned that the marketing spend is around 20% of sales. I'm just wondering, where are you prioritizing that spend across the region and brand? What are the main metrics that you're using to determine the effectiveness of that marketing? Thank you very much.
On question one, but feel free to elaborate, Luca. Basically, the stocks worldwide are healthier and healthier. Having said that, compared to last month, they are still four months in the U.S. Don't forget that it is four months considering depressed depletions. It is in absolute value, it is quite low. The strong selling you will see in H1 is not driving a risk-taking. We still aim at improving the level of our stocks throughout the year, but the comps are very low, which is helping, of course. Worldwide, Europe stocks are also healthy in most countries, let's say. China stocks are healthy as well, particularly on Club. The situation has dramatically improved versus a year ago. Not so much change versus last month when Luca shared. I don't know if you want to elaborate on this, Luca, but no, more or less the same.
Close to four months in the U.S., even if on a far lower basis, we highlighted that overall worldwide, we destock for EUR 100 million, 50 of the more depletion, EUR 50 million or less selling, with a clear acceleration of the stock in the U.S. for 80, if it's not symmetric over five years. Very strong destocking, even if we consider the normal footprint of depletion, seems to be already four months. China is more or less the same, quite healthy. EMEA, even lower. Even if EMEA is a land of many different countries, the average is not the right picture. We have some countries we are clearly under stock. Others, we have a little bit more stock of less dynamics. Overall, I will say in Europe, between 2.8-3 months. Quite ready to accept a rebound.
Rebound, which is there compared to the historical footprint and the historical last 12 months data, but it's still not dynamic as we would like to see and to witness. As to your second question, I'll try to answer while not being too long. Our A&P spend is indeed 20%. We believe it is a fair level. It has changed by nature over the past two years, and it will change again in the future because we're adapting, of course, to the context. Today, there is more BTL than there used to be. It's basically 50% between ATL and BTL. Today, it is more digital than it used to be. It's basically probably, if you take ATL, 60% is digital. Why am I starting with the nature of the spend?
Because in fact, it is easier to trace the efficiency and to track the efficiency of our actions when they are digital or when they are BTL. The most difficult to track is in fact an ATL campaign that is 360 because the impact is never immediate. You have to look at it over the long run and so on. For BTL, what are we talking about? We are talking about if you take a physical BTL, it's shelf stoppers, presence, special displays. You can better track the dynamism and the sales if you compare to stores where you do not have these and so on. You can sample and you can compare. If you take digital also, you have a certain number of KPIs you can track.
Of course, we look much more at engagement versus just the number of connections or touch points if you look at digital. Now, also, it varies a lot from whether you're a small brand or a big brand, whether you're Louis XIII or whether you're Cointreau. If you take Louis XIII, we do track every single action, but big campaigns, which we don't have currently, because in fact, we are very much D2C, we are very much CRM-driven, and obviously, it's easy for us to track the efficiency of our actions. If you take Cointreau, obviously, it's a bit more driven by kind of, let's say, mathematical KPIs and less tracking of the behavior after the communication has been made. It really varies a lot from one brand to another, from one country to another as well.
The last, I think, question you had in the A&P was this 20%, do we over-invest somewhere or where do we invest? In fact, the smaller the brand and the smaller the market, the higher the proportion, of course, because you cannot leverage the scale. If you take small brands like Tellemont, like Belle de Brie, the share of spend is more than 20%, definitely, because we are still in a growing mode, of course, but also because if you spend just the 20%, you will not spend much and you will never emerge. There is a minimum you need to spend. In fact, the same applies to the countries.
The smaller the country in sales, I'm not speaking necessarily in absolute for the country as such, but in size for us, the smaller and the more potential we believe there is, the more we will spend. So this 20% is really an average. It is not at all reflecting the spend per BU or per country.
That's really helpful, Éric. Just to follow up on that, have you made any changes between, particularly your key markets of China and the U.S.? Have you moved any spend between those two, either increase or decrease?
We are decreasing in both markets, but I would more present it as a rationalization of the spend as well. Everything was very easy two years ago. We could spend. We spent, to be transparent, and we spent millions behind an advertising for the Super Bowl.
We had this, let's say, these tons of money that were falling and that we had to spend. We went quick and we were probably a bit less adamant on making sure that every single euro we spend is efficient. We are much more doing like this. We have decreased our spend in China and the U.S., but I don't believe that our impact has decreased as much because we have optimized in the meantime. We've been much more cautious on every single euro we spend. That's point one. Point two, in some other countries, on the contrary, we are spending more or we are about to spend more, driven by also, let's say, actions we are taking. I mentioned Africa, I mentioned Brazil, I mentioned Mexico, I mentioned I could have mentioned some country in Asia, some countries in Asia.
In these countries, on the contrary, we are going to spend more than what we were spending before. In relative value, it is not a big share for the group because it is starting from a low base, but we are going to spend more.
An additional point. Sorry, Laurence. An additional point I do not think we discussed very much about that with all of you is that before COVID, only 4% of our turnover was e-commerce, digital. Now it is 17%. The business model of e-commerce is very different. More efficient in terms of A&P overhead. Also, the channel split, direct sale increasing, has changed, is changing a bit to the gear. When you compare 2020 now with the top line or over 2018, we have some new channel that are a little bit less A&P intensive compared to the average. You have some A&P inside Oberetz.
Let's think to the Louis XIII freestanding store in Oberetz. An increase of brand ambassador and PCD, personal client director, more or less 100 people over 1,008 that are in Oberetz and Brett Coast as well are investment. They are categorized as Oberetz, but they are A&P. The way we are measuring their profitability as well is also share of art, not only sales. The fact that we are able, we are able to increase direct sales much more than to average top line. This is to say that even if we are spending less in the short term, we increase dramatically the A&P footprint. Potentially, if it is your question, we can be even more selective, maybe on the future growth brand that today are lacking a bit of speed on top line, but we have enough.
Do not be scared if we will touch even a bit more A&P because part of the switch of the model has made some part of the turnover is made with a lower gross margin, e-commerce in China because of the format, lower overheads, lower A&P. The opposite is true also for direct sales. Apple to apple is very difficult. Overall, we have a lot of ingredients to combine even with the turnover that is under pressure. We are not cutting into the meat today in A&P. Really clear.
Thanks very much. Eric, I reiterate the words, best of luck for the future. Really thank you very much for your time over the past year.
Thank you so much. I would like, I am not asked to this time, but as a conclusion remark, I would like, first to say this was my last call for Rémy Cointreau. I am really moved today as I am about to leave a group that I have been very proud to work for more than 10 years, a group whose unique relationship to terroir and time has contributed to build amazing brands over decades and even centuries. A group whose values embodied by its reference shareholders speak to me. A group whose teams are so committed and passionate that their contribution, sorry, during these past two years, very challenging years, has been remarkable. I have been appointed at the very beginning of COVID. The least we can say is that a lot has happened since then, positive and negative. As we like to say, what does not kill you makes you stronger.
I truly believe that the group will emerge stronger from the crisis. Thanks to its great brands and while adapting to a changing environment, it has remained loyal to its value strategy, echoing a long-lasting trend that is here to stay, drinking less but better. The future of our industry is about value more than volume, which is better for the people and better for the planet. I would also like to thank you all. This was my first experience as a CEO of a listed group. I have enjoyed every single moment, and that includes the roadshows and various discussions we had together. I have learned a lot from them. Lastly, I must say I am happy and glad that we managed to secure the smoothest transition possible. Franck Marilly will join in June 25, which will allow me to spend time with him.
I am already spending some time with him, actually, to prepare his arrival. I am sure he will be as enthusiastic as I have been about the group and its prospects in the long run. Voilà. I wish you all the best, and I hope our paths cross again in the future, which I will be happy to disclose in the coming weeks as far as I am concerned. Thank you very much.
Yes, I just wanted to take this opportunity on behalf of the group, on behalf of the shareholders and the board, to thank Éric for his tenure at the helm of the company and also for his years at the head of Rémy Martin previously to that.
As you said, a lot has happened since your appointment with COVID and many ups and downs, but thanks to you and your management, we have achieved many things, all of them positive, and we are on a track that remains the same. Our strategy remains the same, and we have not deviated because also of your commitment to the company. We wanted to thank you. As for all of us, we will see you soon, and Luca will speak to you on 25th of July for the Q1 sales. Thank you very much.