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Campari Predicts Gradual Improvement as Primary Liquors Gain

Aug. 6 (Bloomberg) -- Davide Campari-Milano SpA, the maker of Skyy vodka and Wild Turkey bourbon, said it expects gradual improvement for the rest of the year after sales trends improved for its leading liquor brands in the second quarter.

The distiller returned to a “positive organic performance” in the second quarter, it said today in a statement, with sustained growth in North America, Russia and Argentina. Aperol’s sales decline eased, with a 6.8 percent drop compared with a 10 percent slide for the first half. Revenue gains strengthened for Campari, Skyy and Wild Turkey, the Milan-based company’s other primary liquor brands.

Chief Executive Officer Bob Kunze-Concewitz is bringing products to more countries and expanding into new categories as a sluggish economy restrains growth in Europe. Campari added Appleton rum to its portfolio last year with the acquisition of Lascelles DeMercado & Co. of Jamaica.

“We expect the business to continue improving gradually over the second half of 2013, driven by sustained brand building across key brand-market combinations” and success in new markets, the company said.

Campari shares rose as much as 4.4 percent and were up 3.4 percent at 6.135 euros at 4:31 p.m. in Milan. The stock has gained about 8 percent in 12 months.

‘Reassuring’ Forecast

The beverage maker’s outlook is “reassuring,” Nik Oliver, an analyst at Bank of America Merrill Lynch, said in a note to investors. Even so, sales growth in the Americas, where Campari gets almost half its sales, was below the bank’s prediction, said Oliver, who maintained an “underperform” recommendation and a share-price target of 5.60 euros.

Revenue advanced to 698.6 million euros ($928 million) in the first half from 618.3 million euros a year earlier, Campari said. Analysts on average predicted revenue of 711 million euros, according to data compiled by Bloomberg. Sales excluding the effect of acquisitions and disposals slid 3.3 percent, partly due to a change in Italy’s shipment laws.

Earnings before interest and taxes fell to 120.5 million euros from 143.8 million euros a year earlier. Earnings were reduced by 4.9 million euros because of one-time items, mainly for restructuring in the Italian and Jamaican businesses, Campari said.

Aperol sales fell for the first time in at least five years in 2012 amid Italy’s weak economy and a pricing dispute with a large German retailer. Performance in the first half of this year was affected by poor weather in Europe and weakness in Germany that was expected, Campari said.

Aperol International

The spirit is having a “continued strong positive trend in all other international markets,” the company said.

Skyy vodka sales gained 4.8 percent in the first half, quickening to 7.2 percent in the second quarter, while Campari jumped 1.5 percent in the half and 13 percent in the last three months. Aperol, Skyy and Campari are each responsible for about one-tenth of Campari’s sales.

The company hasn’t yet eased investor concern, as only three of 19 analysts who share their recommendations with Bloomberg recommend buying the stock. Six advise selling and 10 favor holding the shares. Of 12 analysts who share price predictions, the average is 5.70 euros, implying a decline of about 7 percent.

To contact the reporter on this story: Katarina Gustafsson in Stockholm at kgustafsson@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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