Hello and welcome to the Rémy Cointreau Q4 Sales 2024-2025 call. Please note this conference is being recorded, and for the duration of the call, your line should be on listeners only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you will be connected to an operator. I will now hand you over to your host, Luca Marotta, CFO, to begin today's conference. Please go ahead, sir.
Good morning, everyone. Thank you for joining us today. As outlined in our press release, full-year sales declined by 18% on an organic basis, in line with our revised sales guidance. In the fourth quarter, sales were down 19%, reflecting a number of different dynamics. In the U.S., we delivered a very strong sales growth, but from a very low base of comparison. As a reminder, last year, most of the H2 shipment occurred in Q3, which means a very weak Q4. In China, however, sales posted a significant decline, impacted by, first, a stellar base of comparison. Last year, following substantial restocking in Q3, we experienced a sharp restocking in Q4. Second point, the inaccessibility of the duty-free channel, which weighed heavily, representing approximately four points of impact at group level, or if you want, in absolute value, around EUR 10 million.
Third point, a negative calendar effect linked to Chinese New Year, with an impact of around -2 percentage points, or EUR 5 million at group level. Technical negative factors in Q4 were around EUR 15 million. Without that, Q4 sales would have been down -13% and not -19%, so six negative percentage points. All these factors clearly played out in a persistently harsh market environment. Breaking down the Q4 sales decline of 19% in volume and price mix effect, volume decrease was -4.6%, primarily driven by China. The price mix effect was negative at 14.4%, largely due to the underperformance of high-end brands in the APAC region. On a more positive note, our yearly cost optimization program is progressing very well. Now, let's look at the sales performance by region over the past 12 months. Americas declined by 20.2% over the full year.
In Q4, as already said, sales returned to very strong growth, but from a very low base of comparison. The volume depletions showed a sequential improvement from Q3 to Q4, but they are still negative. APAC region sales decreased by 18.2% in full year 2024-2025. This performance included a sharp sales drop in Q4, impacted in China by an exceptionally high base of comparison, disruption in the duty-free channel, and Chinese New Year timing effect, representing on the APAC region level 12 percentage points, or the same EUR 15 million that we commented before at the group level, because they all belong to APAC. Third, ongoing challenging market condition in China. Meanwhile, sales in the rest of Asia were slightly up in Q4. Third region, big EMEA region reported a decline of 13.8% for the year, including a mid-teen decrease in the last quarter.
While sell-out trends were positive in a tough and volatile market, we made the decision to optimize year-end inventories to try to start a new fiscal year on solid footing. The region was also marginally impacted by the timing of Easter, which had a negative calendar effect, more or less EUR 2 million-EUR 3 million. This was shipment, sell-in. Now, let's talk the best approximation of sell-out, value depletion at group level over the past 12 months, same yearly horizon. Let's start with the U.S., in which value depletion declined by mid-teens, with volume down high single digits. Compared to pre-COVID, so 2019, 2020, 12 months value depletion are down mid-single digit in the U.S., but excluding the SOP, they are up plus 35%. In China, value depletion declined by more or less 10% year-on-year versus a flat trend over the first nine months.
After a strong December, also benefiting from a favorable calendar effect of Chinese New Year, momentum reversed sharply from mid-February. Still, 12 months value depletion remained plus 35% overall in China if you compare ourselves to pre-COVID level in 2019-2020. In EMEA, value depletion were down high single digit year-on-year, excluding Russia, because there is a scope perimeter topic here. Twelve months value depletion are up low to mid-single digit versus 2019-2020 level. What you can say after all these figures is that group-wide overall, if you consider the performance of 2024-2025 yearly level, value depletion declined low double digits, outperforming, if we can say that, because it's negative, but outperforming the decline of sell-in trends, which was - 18%.
If you do the same exercise on a five-year basis, value depletion grew by mid-single digit, so it grows, also ahead of sell-in trends that were negative of mid-single digit. To conclude this very first slide, we reaffirm, confirm our full-year organic margin guidance that will be between 21-22% of net sales, and we will clearly analyze that during the yearly conference call in the fourth of June. Now, slide number three and four, I'd like to briefly highlight some of the key marketing initiatives we undertook during the last quarter.
As part of our U.S. strategy to drive sales and more specifically to boost visibility for the SOP, we launched a new limited edition in February called "This Is My City." This initiative leverages Rémy Martin's strong ties to music and culture to raise awareness of the limited edition buyers and engage both cognac enthusiasts and music lovers. It is a combined initiative. In parallel with our decision to allocate additional AMP investment to the SOP in order to support the brand's turnaround, this type of initiative helps to strengthen the SOP brand equity and reinforce its presence, particularly in the off-trade channel. Each limited edition is available only in its respective city or state, Detroit, Chicago, New York, Atlanta, and it is sold at the same price as the classic range.
Activation is supported below the line, so directly on the field by a dedicated campaign, so including retail, e-retail, and digital initiatives with a strong focus on cocktail culture, especially Rémy Ginger cocktail. At this stage, early results are very encouraging and are contributing to the stabilization of the SOP volume depletion in the last period. Page number four. There are a few examples of our activation in China for the Lunar New Year. Our teams delivered a good job during this crucial period, navigating the current complexities of the Chinese market with agility and resilience. While Chinese New Year 2024-2025 was not a particularly strong season overall, we nevertheless managed to achieve a modest depletion growth despite the multiple headwinds and clearly gaining market share.
Among the key initiatives, our teams delivered and leveraged successfully the temporary opening of the House of Rémy Martin in Shenzhen as part of our 300th anniversary celebration of the Rémy Martin brand anniversary, supported by the comprehensive 360 degrees campaign spanning media, social media, e-commerce, and trade channels. Second initiative, the release of a special anniversary episode of the acclaimed known series "Blush from Shanghai," further reinforcing Rémy Martin's excellent roles in entertainment and storytelling. These initiatives help drive brand relevance, strengthen our emotional connection with consumers during the good seasons, and enhance the availability for the expo range. Third, the collaboration with the Chinese artist Wang Chuxing, who designed two exclusive local gift packs for the Year of the Snake. These were launched exclusively on e-commerce platforms for Rémy Martin's expo and club, creating strong appeal among younger, dynamic, and digital savvy consumers.
Now let's get back to added figures, turning to slide number five, and let's talk about the full-year sales with a bridge. Full-year sales amounted to EUR 984.6 million, representing, as already said, a year-on-year decline of EUR 209.6 million, or if you want, -17.5% on a reported basis. This performance was shaped by the following factors. First of all, a strong organic decline bigger than the published one, of EUR 215.3 million, so -18% of organic sales decrease. We can split this yearly global performance between -11.8% negative volume effect and -6.3% of price mix. This -6.3% of price mix impact resulted from a slightly negative pricing effect, minus low single digit, and low to mid-single digit negative mix effect. Why?
This is clearly linked to the underperformance of high-end products and to a lesser, but mathematically weighting effect by the Cognac division overall in the global turnover picture. We have also to highlight, as a second element, a positive currency translation impact of EUR 5.7 million, or 0.5% gain for the 12 months. This conversion and top-line gain was mainly driven by the improvement of the U.S. dollar, around $ 4 million, $3.8 million, British pound for GBP 1.3 million, and Chinese Renminbi for RMB 1 million. However, these gains were partially affected by negative impact from the Japanese yen, EUR 0.6 million negative, and Canadian dollar for EUR 0.4 million. This was the global picture for the turnover of 2024-2025. On slide six, we provide, as usual, a breakdown of performance by division compared to five years ago, 12 months, 2019-2020. I'll summarize the key highlights.
In a nutshell, cognac volumes declined significantly in the current U.S. environment, although price mix effect over five years remained strong. Overall, total cognac sales were down 17.8% versus pre-COVID, while value depletion were ahead, declining mid to high single digit. Cognac at group level, even if both are negative, value depletion ran better or less worse than sell-in. In parallel, Liqueurs & Spirits sales showed significant growth, which is the opposite of the cognac, of 33.7% compared to pre-COVID, driven by both volume and price mix. Sales, once again, are below the value depletion trends, which grew by over 40% over the same period. Also for the Liqueurs & Spirits division over five years, value depletion, best approximation of final consumer sell-out, has run better than sell-in. At group level, the consequence, what it is.
This figure reveals asymmetry between sell-in, - 4.8% over five years, and value depletion, which are up at mid-single digit, more or less + 5%, emphasizing the better resilience of end market compared to 12 months 2019-2020. I'll be back on that point on Q&A session, tangible destocking in absolute value on which we need to reflect. This is something positive to capitalize on. Now, let's now turn to slide number seven to delve into organic trends by region. This slide showed the performance at group level, starting with APAC, fully organic sales declined by 18.2%. It is a very important + 23.3% compared to full year 2019-2020. If we look for this region overall at the volume value equation, full-year performance was primarily impacted by the value component due to the underperformance of high-end brands and, as well, partially, the channels' mixed performance.
Inside APAC, the biggest clear role is for China. In China, sales declined sharply in the last quarter, impacted, once again, I repeated it, very important by several factors. An exceptional stellar value-based comparison. Second, the inaccessibility of duty-free channels, which weighed heavily on APAC sales, less eight points during the fourth quarter. Third, a negative calendar effect around Chinese New Year, four points weighing on APAC performance considering the different calendar last year compared to this year. In addition, the market environment was particularly harsh, as I highlighted, from mid-February. This was sell-in. In parallel, best approximation of sell-outs, full-year value depletion in China were down around 10%, as already said, but still more or less up + 35% if you compare to the full year 2019-2020. Comparing China to 2019-2020 is clearly acknowledging a change of dynamics and paradigm positively.
As such, inventory levels in China remained healthy at the end of March. Elsewhere in the region, APAC region, rest of Asia, delivered growth in Q4, rising by a low single digit, led by cognac and, to a lesser extent, Liqueurs & Spirits. Country-wise, Australia performed particularly well in the last quarter. By the end of March 2025, APAC region accounted for 40% of group sales, stable versus the previous year. Second region by relevance in terms of weight is Americas, in which full-year organic sales declined by 20.2% year-on-year and were down by 23.6% compared to full year 2019-2020. The performance is more or less similar to APAC. What is different is this compounder, this performance compared to 2019-2020.
This year-on-year performance includes a mid-teens negative volume effect and a mid-single digit negative price mix impact, reflecting an unfavorable mix of products, states, and format, as well as the price smart adjustment on the SOP. In the U.S., we saw very strong sales growth in Q4, benefiting from a very low base of comparison, and also, on a positive note, sequential improvement in volume depletion, primarily driven by cognac and clearly, notably, the SOP. On a full-year basis, value depletion were down mid-teens, including high single-digit drop in volumes. On a five-year basis, value depletion were down mid-single digits, so negative but better, less worse than sell-in, and up + 35%, excluding slipping off the SOP. In this context, inventory levels in terms of coverage are close now to four months at the end of March based on depletion futures forecasts.
In Canada, sales grew by low single digit in Q4, mostly driven by Liqueurs & Spirits, and Latin America delivered low digit growth in Q4, primarily supported by cognac. In terms of weight, end of March 2025, Americas represented 37% of group sales, down one point. Last but not least, big in-year region in which full-year organic sales declined overall by 13.8% and were down 5.4% compared to full year 2019-2020. This decline mainly reflects a negative volume effect. Good job in terms of price mix. Inside that, we need to give some colors to highlight the performance by sub-clusters. In Europe, third-party distributors sales fell by a very strong double digits in Q4 despite positive sell-out trends. Why? Tough and volatile market, and as highlighted in this first chart, we decided to optimize year-end inventory to try to start the new fiscal year on very solid footing.
Sales were also impacted, meaning this part of Europe, by the calendar shift of these more or less EUR 2 million-EUR 3 million. U.K. and Nordics sub-cluster witnessed Q4 sales down by high single digits, largely due to pressure on cognac in a challenging and promotional market environment. Benelux and France reported a strong double-digit decline the last quarter, impacted by promotional competition in cognac and ongoing softness in Liqueurs & Spirits. Last but not least, MI and Eastern Europe declined by mid-single digit in Q4, affected by ongoing destocking and very aggressive promotional activity by the competition. Across EMEA, full-year value depletion, so the best approximate sell-out, declined to a lower extent by high single digit and rose low to mid-single digit compared to five years ago when we exclude Russia that was there five years ago. Inventory levels for the region remain healthy across most areas.
End of March 2025, EMEA represented 23% of group sales, up one point versus last year. More or less, the regional weight remained the same over the year. The ongoing dynamics in the short-term depth changed a bit, + 1.4% in EMEA and - 1% for the Americas and less for APAC. Now, we have to do another part of the exercise. We turn down to page number to line number eight, and we analyze the performance by division. We start with the odds of our performance, of the goods or the bads, which is cognac. Cognac division posted a fully organic sales decline of 21.9%, so bigger than the average, driven by a 15.6% drop in volume and a negative price mix of 6.3%.
End of March 2025, cognac accounted for 62%, more or less two-thirds of our total sales, down three points compared to the previous year. Let's begin by region inside only the cognac division. What we find, starting with APAC, mainly in China, Q4 sales were significantly negatively impacted by huge base of comparison and persistent adverse market condition. All channels declined in Q4, except for our deadly weapon, e-commerce, which grew by 10% and reached more than 30% of sales penetration over the full year. Because if we do that, this math for the Q4 is much more than 30. Despite the slight growth in value depletion during Chinese New Year, up low single digit versus last year, Q4 value depletion was sharply negative, affected by an unfavorable calendar and a very weak performance from mid-February.
Excluding calendar effect, value depletion would have been down by high single digit in Q4, negative but less negative. While Hong Kong and Macau posted weak results, Taiwan recorded strong growth in both sell-in and depletion during the last quarter. Overall, full-year value depletion in China declined by around 10% in cognac, like the group-level measure in China, but were still approximately, once again, + 35% above five years ago result. Remaining part of Asia, sales were up mid to high single digit in Q4, led for the cognac part by Australia and Singapore, while other countries continued to face tough and fierce promotional market condition. The cognac inside the Americas. In North America, so U.S. and combined with Canada, Q4 sales increased by mid-teens, supported by very low base of comparison, and on a positive note, a continuous sequential improvement in volume depletion, primarily driven by the SOP.
In the U.S. specifically, Q4 value depletions declined high single digit year-on-year, with volumes down low single digit. Gap versus peers narrowed, with the SOP volume being now flat in Q4. This is important. Performance was mixed out, but encouraging across states. Control states continue to outperform the average, so they are down by low single digit in value, while open states remain more volatile. Some green shots here and there emerging in open states. Illinois was strongly up, reversing a bit the trend that we discussed together at the end of December, as well as Georgia, while California, despite being negative, showed a limited decline of single digit, meaning that it is sequentially improving. Sequentially improving California means sequentially improving in the U.S. California is very important for the U.S.
In this context, inventory levels in the U.S. now stood close to four months in terms of coverage estimation end of March, based, once again, on depletion simulation forecast for the future that still clearly need to be achieved. On a 12-month basis, value depletion included a four-point negative price mix year-on-year, value depletion, no sell-in, but remained up plus 12 points compared to 2019-2020. Latin America. In Latin America, Q4 sales posted significant growth driven by Mexico, Puerto Rico, Brazil, and Dominican Republic. We are talking of small figures but positive, mainly led by what? Excellent Louis XIII. Small figures but positive and nice part of the portfolio. In EMEA, third region by weight in terms of the weight for the cognac division, Q4 sales were down by very strong double digits, impacted by inventory optimization and negative calendar effects such as timing of Easter.
Market context remained highly promotional across most countries. In the U.K., sales were down a single digit. Europe third-party distributors posted significant declines, especially in Germany, Austria, and Switzerland. Sorry, I switched my mother tongue language. In CIS, sales declined by mid-single digit but were supported by some restocking in South Africa and Nigeria. Value depletion across EMEA was down by a very strong double digit in Q4 compared to last year. For cognac. Now, let's turn on the same analysis by region inside the Liqueurs & Spirits division, slide number nine. Liqueurs & Spirits division reported a fully organic sales decline of 9.6%, so clearly negative but far less than the cognac one, driven by a 9% drop in volume and only a - 0.6% impact from price mix. At the end of March 2025, Liqueurs & Spirits accounted for 36% of total sales, up three points versus last year.
Now, let's review the performance by region. Let's start with Americas. North America sales recorded significant growth in Q4, supported. For this division was even more important than for cognac, very low base of comparison and better resilience in value depletion relative to the market. While depletion underlying trends is low down, we have to say compared to Q3, they remain solid, very solid versus peer. Take as example Q1 Cointreau, U.S., value depletion Q4, were down mid-single digit year-on-year, but still up + 55% compared to Q4 2019-2020. The gin, our gin The Botanist, showed positive momentum with value depletion up by high single digit year-on-year, doubling, so 100% growth compared to five years ago, the double. Additionally, there was volume. Price mix was up plus one point compared to last year for the 12-month period ending March 2025.
It increased 17 percentage points, so more than the Cognac division in terms of valorization on a five-year basis. In Latin America, sales increased by low to mid-single digit in Q4, led by very strong growth in Mexico and Brazil, and mainly driven by Cointreau. Second region in terms of weight for Liqueurs & Spirits is not in that case APAC, but is EMEA. EMEA, in which sales declined by a single digit in Q4, mostly impacted for Liqueurs & Spirits by soft performance of Benelux, while the U.K. remained nearly stable, and Europe third-party distribution also was negative. Overall performance reflects the group strategy to optimize inventory levels at year-end, as well as negative calendar effect linked to the time of Easter. It is clearly visible also for this division. Beyond this technical calendar factor and a will to start with solid footing, the consumer environment remained subdued as well.
This was sell-in in terms of value depletion. They were down low double digit year-on-year in Q4, despite positive sell-out trends. There is a disconnection between final sell-out in Europe for Liqueurs & Spirits and intermediary wholesaler dynamics. In APAC, which is the third region by weight for Liqueurs & Spirits, very promising for the future, in China, sales grew by strong double digit in Q4, driven by Cointreau and to a lesser extent The Botanist gin, which continued to benefit from a growing trend of mixology. Today, they are low figures, true, but they are very promising. Bruichladdich whisky single malt remained under pressure in line with the broader challenges of the most prestigious whisky categories in this country. Q4 value depletion was strongly positive for both Cointreau and The Botanist in China.
In the rest of Asia, sales increased by a low single digit in Q4, supported by the recovery of Australia, its top market in the region. Japan returned to very strong growth in the last quarter, benefiting from positive phasing effect, reversing the impact seen under Q3, and strong performance across the portfolio out of cognac, so whiskey, Cointreau, clearly, and Telmont, our champagne. In terms of division, what we are missing, we are missing non-group brands. Non-group brands represent now 2% of the group sales, unchanged versus last year, and posted a full-year decline of 27.2% or 25.1 over five years, mostly impacted by the performance of Benelux and U.K. We are almost finished with the prepared presentation. In conclusion, in slide number 10, I would like to reconfirm our organic COP margin guidance.
In a nutshell, we expect to land between 21% and 22% of COP margin in organic terms for full year 2024-2025. Based on the recent evolution of our main currencies and our hedging policies, the group now expects FX rates to have a positive impact on the bottom line on current operating profit of around EUR 5 million. For the impact on the conversion top line, it is already highlighted in the first part of the presentation. Thank you for your attention. I will drink a bit of water and I'll be happy to answer your questions.
Thank you, Luca. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star two. Please note to limit your questions to a maximum of two only. We will take our first question from Edward Mundy from Jefferies.
Your line is open. Please go ahead.
Morning, Luca. Two questions, please, for me. The first is just to come back on what you're saying about China, which was flat from a value depletion standpoint to the end of December, but down around 10% for the whole year with the big drop-off from mid-February. I appreciate there are quite a lot of technical factors flushing around, but could you perhaps provide a bit more color around that drop-off in the most recent month and a half and whether that's continued into April? The second question, Luca, I appreciate that you normally give guidance with full-year results in May, but the trading statement talks to a resumption of that trajectory set for 2029-2030. There's still a fair amount of macro tariff volatility out there.
Could you perhaps talk in the broadest terms about fiscal 2026 at this stage and how you're thinking about range of outcomes on both top line and bottom line?
Thank you for your question. I try to highlight in a clear manner what are the factors that technically weighed on China and clearly on APAC in Q4. Exceptional outcomes, duty-free channel not accessible, weighing a huge weight on the group and group level on China as well, and on forward calendar. It's true that after a good, considering the situation, Chinese New Year, from mid-February, the environment turned down a more harsh environment. The synthetic and important thing to highlight, there's more link to a lack of confidence in terms of wholesaler and global environment being also indirectly hit by the pressure of the trade war with the U.S. overall, not for Liqueurs & Spirits, and it's not a consumer behavior topic.
We acknowledge the fact that the situation in the market is much more difficult than two or three months ago, but it is more a global topic than a specific one. Every time, I repeat, we have the opportunity to get in touch with the consumer. We are beating the competition, and we are also positive. Let's look at the dynamic by channel. E-commerce grew by 10% for B2C, D2C, and also B2B that was supposed to suffer from this lack of confidence. It is more an overall shadowing negative effect and cloudy one that weighs on that. It is more freezing the ability of the wholesaler to get more stock before price increase because they know that if tariffs will be spent, there will be more or less a price increase as part of the mitigation plan, and wait-and-see attitude even more than before.
It is something that will last. We hope not. We hope also that the duty-free topics will be solved. So far, we are very cautious. We are not betting on the clear reopening from day one for the future, but the technical factors plus the lack of confidence are clearly the triggering element that made the exit rate end of March more negative than before. April is first sign of not changing very much the global situation for the bad and for the positive also because every time we are getting in touch with final consumer, we gain market share. For the second question, let's talk a bit of guidance. We've been much more precise, clearly, with Eric Vallat the 4th of June when we comment and we disclose the full-year result. For the 2025-2026, it's clearly early stage to try to give specific indication.
Let's start with the top line because at the end, for everybody, part of the recovery mitigation plan is you want to consider the situation which everybody is needs a top line back to growth in 2025-2026. So far, Visible Bartha, to my knowledge, is betting on a 2025-2026 sales consensus + 4.6%, more or less the same for Bloomberg, so we can say mid-single digit. It is early. We'll comment on that. We'll be more precise with Eric Vallat the 4th of June. What I can say is that this is consistent with our mid-term guidance that fits mathematically with the 2029-2030, so mid-to-high single digit top line. Nothing more to add. We'll be giving more color. Is it scaring me, this consensus? No. We'll comment on that. At this stage, overall, it seems like a good approx.
What you have to understand is that the compounders inside that are moving pieces. Growth equation is very, very complex for the next year as it involves several paths that are not totally clarified at this stage that will change eventually the commercialization politics inside the country. Let's start by China. Acknowledging the fact that the consumer behavior is not a topic for ourselves at this stage for our analysis, it is more the external macroeconomic and trade war impact that may have a negative impact in terms of confidence. China, today I speak Italian, sorry, is yet to confirm official statute until 5th of July. It's easy to understand that the involvement of DIS on this equation could potentially change the game for China as well and the group level.
In the U.S., the news flow in a particularly volatile environment, and they are changing one day to another. Overall, considering the actual environment, we'll be more precise, but the actual consensus don't scare us. This was top line for 2025-2026, which is consistent with the mid-to-long term. Your question is, what happened to the bottom line? If I had a crystal ball, I would be rich. Let's try to factor that in a clear way, the clearest possible before the 4th of June. As per Glass, normally speaking, we do not expect an organic improvement in COP margin for 2025-2026. Why? Because at this stage, we are factoring what seems to be there for 2025-2026. A risk of tariffs in both China and U.S. that, if it is the case, will not be fully accepted during the first year.
On that point, we'll be very clear the 4th of June. I commit on that with Eric on the gross impact, net impact, and some color in terms of mitigation plans. I can already tell you the part of mitigation plans is not only cost-cutting or supply chain optimization. It's also growth. Part of our we are fine with plus 4.6 at this stage is that we are betting and we are counting on a top line growth clearly coming from the U.S. because, I'll be back on this point later, they need to send the lift back after two years of very negative performance, and they are set on a lower stock in asset value compared to three, four, five years ago.
At this stage, said no organic improvement in COP margin for 2025-2026 if both tariffs in China and U.S. stand because part of mitigation are also counting on the expected top line back to growth that need to be also fueled with AMP. We already said with Eric that we'll be more below the line, more volume-oriented, more depletion-oriented, and a bit less on brand awareness because brand awareness is fine, but now there is a fire. We need to extinguish the fire. It has to fuel with specific costs like specific AMP and specific overhead. Part of the growth meaning will be reinvested. As a consequence, the impact if the tariffs in China and the U.S. are there can't be offset during the first year.
What if, which is the question of you and many of you, Bart, I can name you all with a different intensity of opinion and aggressiveness. What if no tariffs organically? If no tariffs in both China and the U.S., organic operating profit improvement. I repeat, what if no tariffs organically? Organic COP margin improvement for both countries. Why I'm insisting on organic? I cannot commit. I can only disclose, give some color on ethics, but in this moment, part of the trade uncertainty is weighing clearly on the dollar. For us, the dollar is very important. On that part, I will every quarter give you our latest estimation, but I will never commit on that, but even more on 2025-2026 on ethics guidance, only organic one. What if only tariffs in the U.S. and not in China?
That, I don't know if it's true, but seems to be a little bit more of a positive attitude more on the China level considering the dialogue between Europe and China at this stage. What if it's only U.S. tariffs? COP margin should be in terms of percentage slightly down, meaning that the growth of operating profit will be lower of the growth of the top line. Once again, if both tariffs are there, we will not be able to offset totally the impact in year one. We will highlight that. If we beat 40%, 60%, 50%, 70%, we will adjust all around the year.
The 4th of June with Eric Vallat will give you the global direction, gross net mitigation plan for both, and then also Eric Vallat will fly for new destinations for new adventures and also with the new guy or girl at Yelm, we will adjust that considering dynamics of the market, tough environment, and a very complex situation. I cannot be more transparent than that. I challenge you. I challenge you to say who is able today or this calendar according to our calendar to give you some more precise or is saying that this year we will offset both components of tariffs if it happens. It is quite impossible because it's an important one. Last part of your question, sorry for my long answer, it is for 2029-2030.
Your hidden question is why you are reassuring that, the mark, why you're saying because it is, it was, and it's clearly a firm commitment. We cannot overnight only profiting of something which is very complicated, a change on the people at Yelm, and getting out of a commitment. We have to wait and understand all the elements that are behind that before reconfirming or cancel that one. Mathematically, it's achievable. Despite expected declines in result for the second year considering this year, despite a complex situation, we are fairly ahead of the schedule, and we demonstrate that the elasticity, both on positive and negative, is still there. For 2025-2026, we expect a very substantial and strong restocking effect in the U.S. helped by more than ridiculous comps. But, and but is key in the answer.
We have to understand this guidance, what happened because it's spending on several important parameters that are not still fit only in our will of decision, in our capacity to decide tariffs, trade war, China, and also eventually, but it is too early to say, eventually adaptation of the strategy that will not change. Clearly, we have to understand what the new guy or girl at Yelm will decide in terms of the execution of the strategy. We are talking more of adaptation, but it's too early to talk about that. At this stage, it is confirmed. It is achievable. The 4th of June, I'm sure that we'll be back on that point because, as said, mathematically, it sits on one point, the ability of the U.S. to start strongly the year and to send the lift back with the restocking effect.
If there will be some news, positive or negative, there will be acknowledged. So far, 2029-2030, the guidance is confirmed. On that point, no, no, sorry. I will finish with one because I passed your question also to say something that I commit during the presentation, which is very important to try to put figures behind concepts that otherwise are cloudy and smoky. Why we are counting overall at group level, mainly in the U.S., for the future? Look at the math. Everybody is thinking, saying that we are too optimistic in terms of depletion coverage, in terms of stock, five or more months, okay, but highlighting the fact that we are now below pre-COVID levels in absolute terms, that the stock coverage is still too high. I do not want to comment on that. Everybody's own conviction. Look at figures.
What happens in five years in absolute terms to our value stock? Best approximation of stock sits everywhere at the home of the consumer, in their stomach, in the wholesaler, whatever it is. Over five years, compared to pre-COVID, we have destocked more or less EUR 100 million. So, 10% of the group turnover. Why? EUR 50 million more at group level in value depletion, apple to apple comparable, and we sold, in terms of sell-in, EUR 50 million less. The main part has been done clear in the U.S., and the middle part, EUR 80 million of that in 2024-2025. The lift now, the elevator is a minus three, and the normative is floor number 15. The energy is there. The graphite of the nuclear reaction is ready. It is up to us to let it possible. Compounders are very positive for us in the near future.
We are betting on that. Sorry for my long question and sometimes out of the topic, but I think, and I quote, "Was important for you to understand part of this math on the destocking effect over the long period and the fact that they are hitting positively the future quarters." We hope that. We count on that. We count on the U.S.
Thanks, Luca.
Thank you. We are now taking our next questions from Sanjeet Aujla from UBS. Your line is open. Please go ahead.
Hi, Luca. Two quick ones from me, please. Just coming back to the U.S., I think you highlighted four months of inventory, so it's ticked down a little bit from December, which is ultimately based on your forward depletion expectations. Are you able to share those forward depletion expectations?
We've seen some sequential improvement, but what are you building into the plans for fiscal 2026 on depletions, please? Secondly, on FX, appreciate you're not gliding, and it's particularly volatile, but can you just give us some mark-to-market sensitivities on FX and where your hedging is today on the transactional side, please? Thank you.
Thank you for your question. On the first point, if I give you that, I need to disclose the guidance right now for this year because U.S. are so important in the equation for next year and the spark being the depletion. I come to the conclusion I need to give the. On that point, we'll give you our estimation the 4th of June with Eric. 4th of June will be a conference call of seven hours and half. That's a joke. Take some sandwiches with you, sunglasses, cream.
That point will be addressed 4th of June. Clearly, restocking is huge, so we're counting on double digits next year in top line. The depletion underlying will be more precise during the conference call of the 4th of June. In terms of FX, give me a second because otherwise Chris Pitcher will shout at me because I'm not precise. The expert, hi, Chris. If the tariff environment is complicated, the consequences on the FX are a nightmare. Why that? Because everybody's covering the flows, but not the P&L flows, it's the intercompany flows. Every movement called supply optimization, inventory management, you have delivery before time, after time. This is something which is not really correlated. On top, we built a budget some weeks ago, and the dollar was 107, 106, 108, and now it's 115. Nobody knows what it will become.
As you know, our hedging policy is to cover by anticipation. We prefer not to be tactical and get all the options, but to be fit on very predictable, sure figures. The only thing I can say, and today I was prepared for your question and Chris Pitcher's question as well, to give you what is three different scenarios, what if considering what we have covered, the expected phasing of the future year, and the movement of the spot rate for the uncovered part of the 2025-2026. Please listen to me carefully, and every three months, every quarter, I will update you on that sensitivity analysis. If we consider what was normal until the 20th of March, a $1.07 U.S. dollar spot rate, hedging, what we have done, option, all the cooking will determine a hedge rate of 1.09.
In that part, the impact on the forex, the forex on operating profit is marginal, negative from EUR 3 million-EUR 5 million. Second hypothesis, 1.15 spot rate, more or less today, hedging rate switched from 1.09 to 1.12. The negative forex impact increased from between EUR 10 million and EUR 15 million on comp, with more precise also in June in terms of phasing, but first scenario, EUR 3 million-EUR 5 million, second one, EUR 10 million-EUR 15 million. Let's imagine a crash, negative scenarios where the dollar is 1.25 spot rate, the average of the full year. Hedging rate deteriorates and becomes 1.14. As you see, this cautious approach limits the losses because the impact will be clearly bigger, but still limited. No more EUR 10 million-EUR 15 million, but EUR 15 million-EUR 20 million.
Once again, 107, three to five on yearly basis, 115, 10-15, and worst case is 15-25, 15-20. This will give you some indication. Do I commit on that? No. I will give you every quarter the estimation. We do not guide either, never, but even more next year on published effect. I give you our estimation every quarter to adjust. The guidance will be done as usual on organic terms. Have you seen and noticed I gave you FX impact on bottom line, not in top line because we do not cover all the flows, only the net position, so the bottom line. In terms of saves, the conversion impact clearly will be more severe because I'm more linked to the spot rate, and will be communicated following two or three scenarios, as said, in June as usual, and every quarter adjusted.
Only to remind you, if you are in negative scenarios of 125 with 15-20 million bottom line negative impact, the impact in top line, which is not covered, will be harsh, more, more important. In terms of percentage of profitability, published rate, not out of value, will be increasing. I hope I was clear enough on that point.
Thank you, Luca.
Thank you. We are now taking our next question from Laurence Whyatt from Barclays. Your line is open. Please go ahead.
Morning, Luca. Thanks very much for the question.
I think it would be really helpful if we could just get some clarification on your U.S. expectations because, of course, we're sitting here looking at, say, the Nielsen data, NAFTA data, which is still looking relatively negative in recent months, sort of the group looking at sort of mid-teen negative with the cognac business taking just north of negative 20%. In terms of understanding the sort of restocking effect that you anticipate, would you anticipate that wholesalers would increase their stock levels even if your depletion levels would remain negative in the near month? Is there a scenario where we still have negative depletions in Nielsen, yet the wholesalers increase their stock levels? Is it reasonable to expect we'd need to see positive depletions before we expect that sort of restocking effect to become very apparent in your reported numbers?
Secondly, just in terms of mitigation plans, of course, there's been some speculation with regards to moving production. Of course, that seems to be a desire of the U.S. administration. Are there any scenarios where you would consider moving your production sites, whether that's bottling or, of course, there are restrictions on what you can do there? Are they any part of your mitigation plans? Thank you very much.
I started with the second one. Mitigation plan with switching operation in the U.S., no. Not at this stage. Not to my knowledge, no. Mitigation plan we will disclose the 4th of June are based on an ongoing concern on the way we buy or we build our inventories, we deliver operation, and we sell. No change on that part so far.
Second, first question is what if, as I said, I can't give you figures right now, be more precise for June, but the restocking impact is important. Clearly, we are betting on more symmetry between depletion and sell-in. It is not the case today, but the asymmetry is a bit the other way around since many quarters. Depletion will be negative, but less negative sell-in. The lift being at minus three as a floor. Technically speaking, even if it's not what we are wanting, we are not betting. Technically, even if depletions are negative, there is space for positive sell-in in terms of base of comps that are changing. One technical point, Nielsen is only a part of the reality. Nielsen is a panel for open state that is under evaluating performance in chains and Lycos stores, as I already said.
We combine that with a more global panel, including NAFTA, so control states, in which the last two quarters we overperformed, and with the part which is, because more or less combining the two, we are covering 72%. We are still 28% not covered. That is beyond trade and the part of the other countries that are not, other states that are not covered by both panels. It's not perfectly overlapped. If you look only at Nielsen, you will not have the total, the reality. What is our best estimation? We are highlighting that in our spreadsheet, but give you also Nielsen, NAFTA discussed in total picture. Most important thing, I repeat, even if depletions are negative, technically should drive to a top line increase because of the base of comps and the huge asymmetry salines allows at group level, and mainly in the U.S. in 2024-2025.
$100 million less stocking value compared to five years ago, and destocking of 80 in the last year.
Just to clarify, is it reasonable to believe that the wholesalers are going to look on a historic basis with regard to the number of months of inventory, or do you anticipate the wholesalers to look at the forward levels that you're anticipating as well?
It will be clearly a commercial debate. They will be trying to put the debate on the coverage without considering too much the historical level, considering that maybe this level will not be reached again. Our part of our job is also to convince them, as part of our commercial people, that this purpose needs to be moderate, considering also the normative figures in terms of depletion in absolute level.
Clearly, it is part of our job to convince them to get out on normal algorithms of vendor inventory management based on stock coverage, considering that having a list at floor minus three is normal when you have an hotel which is built from the 15th floor and more. Clearly, it will be a debate. It is there that our execution ability needs to deliver.
Understood. Thank you very much.
Thank you. We are now taking our next questions from Chris Pitcher from Redburn Atlantic. Your line is open. Please go ahead.
Hi, Chris. Good morning.
Good morning, Luca. We covered the currency. Thank you. A couple of questions, please.
On capital investment and ODV prices, given the recent campaign's finished, can you give us an idea of what sort of prices you're buying ODV at and whether you've thought about capital investment plans for the next sort of three to five years? Just for clarification, the phrase restocking keeps getting used, but really what this is, is that $80 million destocking. If inventory levels remain flat, you get a very significant benefit in the United States just from that part of it unwinding. You're not hoping to see a restock. I just wanted to check that.
Yep. The second part is that it's mathematical. The impact is with the mathematical destocking on this year. Clearly, there is a restocking which is mathematical because you start for a very negative.
As Lawrence pointed out, it can be moderate or clearly multiplied, enhanced by the fact that the depletion spark becomes positive or not. If it remains negative, you have more debate about the historical relevance of figures compared to the actual state of the art. If it is increasing, and it's the case in volume, it will be less in value because also our decision to reposition partially exists in some states of the SOP. It will be more easy to understand. In terms of—
Can I just—yep, sorry, sorry. You said four months in the United States, and previously, you have said a range of two to three, I think. That would indicate perhaps there is—
In terms of normative, okay, but it's four months more or less.
When we were at COVID two to three, we were out of stock in a lot of point of sales. There is also a delay because it is a stocking trade overall. There is also a delay of execution between wholesaler and retailer. Two or three, when there will be a restocking impact, we jump to four to five automatically because we need to feed up, to feed the water that we are waiting in the houses because it is more inside the building at wholesale level. Capital and cash allocation on a very long term, it is not the right comprehense. What I can tell to you is that we will disclose that once again in June, but the CapEx will be reconfirmed in terms of strategic intention, in terms of investing behind our strategic pillars for the future, but will be probably reduced in terms of intensity in value.
The latest one was between 60-65. Probably we will squeeze down a bit to try to improve a bit our free cash flow conversion rate and to improve a bit, or what is possible, our return on invested capital. It's part of our business model to try to improve it a bit. In terms of prices, we are not counting on price decrease in terms of harvest and buying pattern. You know it is published that everybody's trying to reduce the future engagement without betrayal, considering our DNA, considering with all respect all the effort, all the linear has been done, accompany them. It will be a decrease, but not a decrease in prices.
With the way of cooperating, that will be visible in the strategic working capital as a decrease, but not for the first year, only a very limited part, because we are talking of engagement for the future. Where you can, you will see that more at the end of September when we will disclose in off-balance sheet elements inside the URD, the document, our set of accounts, and you will see the valorization of the future ODV commitment, and you will see this reduction will be visible. I repeat, it will not be a price reduction per hectoliter. It is more a containment of the buying pattern respecting our past engagement and betting together for a bright future with the vineyards. We are not betraying our DNA.
Thank you very much.
Thank you. We are now taking our next questions from Trevor Stirling from Bernstein.
Your line is open. Please go ahead.
Hi, Luca. Just one question from my side, Luca. You've talked about the U.S. needing to send the lift back, and clearly, as we've talked in the past, the potential is there, but you need that spark, and that clearly spark has to be depletions turning positive. You've mentioned about the SOP being stable in volume terms, still obviously negative because of the price adjustments, but the overall portfolio is still negative in volume. When do you think we can start to see that total portfolio into positive territory in value?
I hope the sooner the better. I can only hope that will be soon because the comps are very low. The action that we are putting in place is giving some fruits. So far, more at volume level. Liqueurs & Spirits are waving, but clearly, so far, we are still negative.
The restocking impact will be there, but I'll be the happiest guy in the world, even more than you all, when we'll be back in sustainable positive length and value depletion for cognac division because at the end, in the U.S., the way, the cognac division is clearly overwhelming the rest on a more sustainable basis. The SOP needs to continue to deliver. Improving in volume because the value will be a little bit depressed with some price adjustments in some more commercial state. 70, 38 need to continue to contribute even more than now. The upper part of the portfolio, I hope it now is now stabilized and needs to grow based on very low comp, very low comp. We are quite modestly, reasonably optimistic on that.
Super. Thank you very much, Luca.
I cannot commit on a calendar on that level.
I understand.
No problem.
Thank you.
Thank you.
Thank you. It appears there are no further questions, so I will hand you back to Luca Marotta for any additional or closing remarks. Please go ahead, sir.
Thank you for joining this call today. As you've seen, we respected our guidance. I confirm that we respect our bottom line guidance between 21 and 22 and fine with the consensus so far on bottom line as well. I'll give you another answer to a question that has not been posted or asked. See you all or talk with you all with Eric, the 4th of June. It will be very intense with Marie-Amélie de Leusse as well, our Chairman. A very intense conference call with the result and which, I repeat, is very important.
We'll give you some information about the technical effect, the state of the art of the tariff situation at that date, at that deadline, and what is the impact, qualitative and quantitative, in terms of guidance in the short term and if any changes need to be applied to the medium to long-term guidance. It will be a very long, intense one. Until then, take care and have a nice day. Bye-bye. Ciao, ciao.