Italian drinks maker Campari expects business to improve gradually in the second half of this year after a regulatory change and one-off restructuring charges hit earnings in the first six months.
The maker of the bitter red aperitif of the same name grew in its key markets in North America, Russia and Argentina, while other developed markets, particularly in crisis-hit Europe, had either stabilised or improved.
"This means that with the exception of Brazil, we expect to either remain stable or improve our trends in the second half of the year," Chief Executive Officer Bob Kunze-Concewitz said in a conference call.
Nearly half of Campari's group sales of 698.6 million euros ($925 million) are generated in the Americas and, as for its larger peer Diageo, the strong growth in that region is helping the group offset more sluggish performance in other markets.
Campari, the sixth-largest player globally in the premium spirits industry, said its Brazilian business had been hit by a slowdown in consumption of its local brands, including Dreher brandy and Old Eight and Drury's whiskeys.
Shares in the company rose more than 4 percent after the results release to nearly a three-month high and were up 3.29 percent at 6.13 euros by 1324 GMT, outperforming a 0.46 percent rise in the European food and beverage sector index.
"The first-half numbers from Europe outside Italy were the ones where we were most surprised to the positive. We were expecting a decline in organic sales growth of around 7 percent and it came in flat," said Josh Puddle, an analyst with Berenberg Bank.
Campari reported a 26.1 percent drop in first-half net profit to 57.6 million euros, hit by non-recurring charges related to restructuring in Italy and Jamaica and a regulatory change related to payment restrictions on Italian food and beverage companies.
This resulted in Campari taking a 25 million euro hit on sales after clients decided to spread their orders throughout the year, rather than concentrate them to the first half, which in the past was the key restocking period.
"Overall, the results were in line with expectations since the destocking was known, but Italy and Europe have performed better than we had expected," a Milan-based analyst said.
Sales were up 13 percent to 698.6 million euros, boosted by Campari's acquisition of Jamaican rum maker Lascelles de Mercado late last year.
On an organic basis, which strips out acquisitions and currency moves, group sales fell 3.3 percent in the first half, but rose 1.4 percent in the second quarter, signaling an improving trend.
"The return to positive growth organically in the second quarter should provide some relief," said Berenberg's Puddle. ($1 = 0.7553 euros)
