Davide Campari Milano N : Campari Group announces 2020 nine months results

Improved overall performance in the nine months 2020 thanks to a very positive third quarter,

boosted by the impact of staycation on aperitifs in the peak summer season

On-premise recovery in the third quarter in a continued challenging environment,

whilst underlying brand health is confirmed in core markets

9M 2020-HIGHLIGHTS

• The nine months performance showed an organic improvement driven by a very positive third quarter, while the ongoing effect of the COVID-19 pandemic is still active and challenging.
• Reported net sales of €1,282.5 million, -2.8% organic change. On a reported basis, total change of -1.6%after a positive perimeter effect compensating a negative exchange rate effect. Very positive organic growth in the third quarter: +12.9%.
• EBIT adjusted1 of €248.5 million, an organic decline of -15.1%(280 basis points dilution), due to negative sales mix and lower absorption of fixed costs in connection to COVID-19,partly mitigated by a positive performance in the third quarter (+11.2% organic).
• Group pre-tax profit adjusted2 of €220.0 million, down -15.1%. Group pre-tax profit at €190.2 million, down -22.4%.
• Net financial debt of €1,068.2 million as of September 30th, 2020, up €290.8 million vs. €777.4 million as of December 31st, 2019: the positive free cash flow generation, driven by the third quarter, was entirely offset by an overall cash out of €461.6 million3 driven by M&A transactions, dividend payment and the share buyback program.

Milan, October 27th, 2020-The Board of Directors of Davide Campari-Milano N.V. (Reuters CPRI.MI-Bloomberg CPR IM) approved the additional financial information at September 30th, 2020.

NINE MONTHS 2020 RESULTS AND OUTLOOK

With the progressive uplift of restrictive measure towards the end of the second quarter, the Group's business performance in the third quarter largely benefited from the increased seasonal consumption in consumers' home countries, where they spent their holidays rather than travelling abroad ('staycation effect'). This effect impacted in particular the aperitifs business in their peak summer season in core on-premisemarkets, notably Italy. The effect was also boosted by favourable weather conditions, whilst strong brand momentum continued in the off-premise.

Nevertheless, the evolution towards the end of the quarter in the on-premise was characterized by renewed signs of uncertainty due to the resurgence of the pandemic.

Looking at the remainder of the year, the restrictive measures which are being re-introduced by the governments of many affected markets are expected to potentially generate an adverse effect on consumption in the on-premise channel, the trend of which remains highly unpredictable, particularly for the key holiday season at year end. Moreover, shipments in the US are expected to continue to be affected by the ongoing destocking activities at wholesaler level, as opposed to very positive sell-out trends.

Bob Kunze-Concewitz, Chief Executive Officer: 'After the first half being strongly penalized by the effect of COVID-19,our third quarter results showed an improvement, boosted in particular by a temporary staycation effect in many countries. However, with the resurgence of the pandemic in many areas of the world towards the end of the third quarter, the overall scenario in the short-termremains highly uncertain. Nevertheless, our brands continue to experience strong consumption trends in the off-premisechannel across key markets, confirming their solid underlying brand health. While we will continue to undertake all the necessary actions to contain the effects of the pandemic on the business in the short- term, we remain focused on pursuing our long-termstrategy. Furthermore, we remain firmly convinced that the out-of-home social experience and conviviality will remain essential to consumers' lifestyles, as demonstrated by the consumers' consumption behaviours in the third quarter.'.

1. Before operating adjustments of €(48.3) million in 9M 2020 and €(13.9) million in 9M 2019.
2. Before operating and financial adjustments as well as non-recurringearn-out liabilities revisions, totalling €(29.8) million in 9M 2020 (vs. €(13.9) million adjustments in 9M 2019).
3. Of which acquisitions of RFD, Champagne Lallier and the investment in Tannico for a combined amount of €126.6 million, share buyback of €212.3 million, tax payment related to the disposal of Villa Les Cèdres of €60.1 million and dividend payment of €62.9 million.

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SUMMARY FINANCIAL INFORMATION FOR THE FIRST NINE MONTHS ENDED 30 SEPTEMBER 2020

	9M 2020	9M 2019	Reported	Organic	Forex	Perimeter
	€ million	€ million	change	change	impact	impact
Net sales	1282.5	1303.8	-1.6%	-2.8%	-1.5%	2.7%
Gross profit	761.5	808.6	-5.8%	-7.1%	0.1%	1.2%
% on sales	59.4%	62.0%
EBIT adjusted	248.5	288.0	-13.7%	-15.1%	3.2%	-1.9%
% on sales	19.4%	22.1%
EBIT	200.3	274.1	-26.9%
Group pre-tax profit adjusted	220.0	259.0	-15.1%
Group pre-tax profit	190.2	245.1	-22.4%
EBITDA adjusted	307.1	340.3	-9.7%	-11.7%	2.3%	-0.3%
% on sales	23.9%	26.1%
EBITDA	258.9	326.4	-20.7%
	30 Sept 2020	31 Dec 2019
Net financial debt	1,068.2	777.4

REVIEW OF CONSOLIDATED SALES FOR THE FIRST NINE MONTHS 2020 RESULTS4

By geography:

• Sales in the Americas5 (43.1% of total Group sales) were down organically by -3.6%. The Group's largest market, the US, showed a flattish performance affected by the ongoing destocking at wholesaler level. Positive performance in the third quarter (+8.9%) was largely driven by the solid performance of Espolòn and the Jamaican rums thanks to strong category momentum, coupled with a favourable comparison base. Depletions continued to grow above shipments (+13.4% in the third quarter) and brand momentum in the off-premisecontinues to be strong across the whole portfolio: sell-outat +30.8% overall, outperforming the local market (up +20.4%) since the lockdown6. Jamaica registered an overall decline of -7.6% due to on-premise closures and reduced tourism flows, amplified by a tough comparison base. Canada grew by +11.1%. In South America, Brazil was heavily impacted by the COVID-19 pandemic showing a negative performance across the portfolio (-11.4%).
• Sales in Southern Europe, Middle East and Africa7 (27.2% of total Group sales) registered a significant organic decline of -14.2%, mainly driven by the overall decline in Italy (-11.6%)mitigated by a very positive third quarter (+35.4%) as the on-premisechannel began to progressively reopen during the key summer season. The entire portfolio registered growth in the third quarter, most notably the higher-margin aperitifs portfolio. The outperformance was driven by the short-termreaction to the lifting of restrictive measures as well as the staycation effect which drove domestic consumption, offsetting the lack of international tourism, alongside very favourable weather conditions. The evolution towards the end of the third quarter in the on-premisewas characterized by renewed signs of uncertainty due to the resurgence of the pandemic. Other markets in the region were also strongly affected by the pandemic (-21.6%), with the declines in Global Travel Retail (-64.8%),Spain and South Africa more than offsetting strong growth in France, up double-digit benefitting from positive shipment phasing after destocking ahead of the new route-to-market set up.
• • North, Central and Eastern Europe8 (22.8% of total Group sales) grew organically by +11.3%. Germany registered a solid growth (+11.6%), with an acceleration in the third quarter (+25.5%), linked to staycation boosting the core aperitif brands. The UK showed resilient growth (+22.8%), despite a tough comparison base. Russia also showed a sustained performance (+19.8%), accelerating in the third quarter. Other markets in the region were overall positive (+4.5%).
• Sales in Asia Pacific9 (7.0% of total Group sales) grew organically by +5.5%. Australia registered a strong growth overall (+21.0%) with an acceleration in the third quarter. Other markets in the region declined overall by -28.3%:

1. Group on-premise vs. off-premise split based on FY 2019 net sales: 40% vs. 60%.
2. Americas' split on-premise vs. off-premise based on net sales of FY 2019 at regional level: 35% vs. 65%.
3. Source: US Nielsen data xAOC+Total Liquor, representing c.34% of total US off-trade volume, from W/E March 7th, 2020 till W/E October 3rd, 2020.
4. Includes Global Travel Retail. SEMEA's split on-premise vs. off-premise based on net sales of FY 2019 at regional level: 65 % vs. 35%.
5. NCEE's split on-premise vs. off-premise based on net sales of FY 2019 at regional level: 30% vs 70%.
6. Asia Pacific split on-premise vs. off-premise based on net sales of FY 2019 at regional level: 30% vs 70%.

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China declined after negative shipment phasing in the third quarter. Japan declined by double digit due to destocking in connection with the route-to-market change.

By brand:

• Global Priorities (58% of total Group sales) registered an organic change of -2.6%.Aperol was slightly up in the nine months (+2.6%), while Campari was flattish (-0.7%), with both brands accelerating in the third quarter benefitting from the staycation effect as well as the on-premisereopening, largely offsetting the decline registered in the first half. Grand Marnier showed a negative performance (-10.4%), with positive performance in Canada more than offset by negative shipment performance in the US, due to the ongoing destocking and its on-premise skew, as well as GTR. SKYY declined by -15.3%, with the core US market impacted by ongoing destocking at wholesaler level. Wild Turkey declined (-4.3%) despite a positive performance in the third quarter. The growth in the Jamaican rum portfolio (+6.2%) was driven by the core US, Jamaica and the UK.
• Regional Priorities (16% of total Group sales) slightly declined organically by -1.3%, driven by Cinzano, The GlenGrant, the bitters portfolio and Bulldog despite the resilient strong growth of Espolòn which accelerated in the third quarter as well as Forty Creek in core Canada.
• Local Priorities (12% of total Group sales) registered a flattish performance (-0.9%),as the positive performance in Wild Turkey RTD, Ouzo 12 and Cabo Wabo was fully offset by declines in on-premise skewed single-serve aperitifs in core Italy, despite a positive seasonal rebound in the summer season.

REVIEW OF FIRST NINE MONTHS 2020 RESULTS

Group sales totalled €1,282.5 million, down by -1.6%in value on a reported basis. The result reflects an organic sales change of -2.8%,with a very positive third quarter (+12.9%). FX effect was negative (-1.5%),mainly due to a deterioration in the emerging markets currencies against the Euro, whilst the perimeter effect was positive (+2.7%)10.

Gross profit totalled €761.5 million, down by -5.8%in value on a reported basis and down -260 basis points to 59.4% of net sales. It declined organically by -7.1%,generating an organic margin dilution of -270 basis points, due to an unfavourable sales mix, driven by the outperformance of lower-margin Espolòn, due to high agave price, as well as shipment declines in higher-margin Grand Marnier, Campari and Aperol in the United States and weak results in the aperitif portfolio in Italy, in addition to the lower absorption of fixed production costs. Improving trends in the third quarter were driven by positive sales results, while margin continued to be affected by the negative sales mix.

Advertising and Promotion spending (A&P) was €215.4 million, down by -7.3%in value on a reported basis, corresponding to 16.8% of net sales, generating +100 bps accretion. It declined organically by -6.9%,driving +80 bps margin accretion, thanks to cost containment measures and postponement of initiatives in the on-premise channel, particularly during the second quarter. In the third quarter, A&P increased by +17.9% organically, generating a margin dilution, driven by accelerated investments behind the key higher-margin aperitifs, together with continuous investments into digital initiatives.

CAAP (Contribution after A&P) was €546.1 million, down by -5.2%in value on a reported basis (down organically by - 7.2%), corresponding to 42.6% of net sales.

Structure costs, i.e. selling, general and administrative costs, totalled €297.6 million, up by +3.2% in value on a reported basis (-110basis points), to 23.2% of net sales. Organically, they grew slightly by +0.7%, generating a dilution of -80basis points, mainly due to the lower absorption of fixed costs (given the net sales decline in the first nine months) with cost containment measures mainly related to the variable and discretionary costs. During the third quarter, SG&A grew by +1.8% in value, significantly behind net sales, thus leading to organic margin accretion.

EBIT adjusted was €248.5 million, down by -13.7% in value on a reported basis, at 19.4% of net sales (-270 basis points). It declined organically by -15.1%, generating -280bps margin dilution, due to the negative sales mix, the lower absorption of fixed structure costs given the topline decline, coupled with a tough comparison base (+9.9% in value in 9M 2019). Improving results in the third quarter were driven by positive sales growth, nonetheless marginality continued to be affected by the negative sales mix and acceleration in A&P investments, partially mitigated by SG&A efficiencies.

10 Mainly including the effect from the acquisitions of Rhumantilles, Ancho Reyes and Montelobos (completed in Q4 2019) and the French distributor Baron Philippe de Rothschild France Distribution S.A.S., of which only the third-party brands were included in the perimeter effect (completed at the end of February 2020), net of discontinuation of agency brands, mainly in Northern Europe.

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Operating adjustments were negative at €(48.3) million, related to: €(27.3) million in the first half of the year, mainly attributable to the impairment loss of €(16.3) million for Bulldog trademark11, the donations of €(2.7) million made by the Group to support the sanitary emergency and the M&A transaction fees; €(20.9) million in the third quarter of the year, attributable to the restructuring program in Jamaica for €(11.2) million, the re-domiciliationand other initiatives.

EBITDA adjusted was €307.1 million, down by -9.7%in value on a reported basis (down organically -11.7%),corresponding to 23.9% of net sales.

EBIT (15.6% of net sales) and EBITDA (20.2% of net sales) were at €200.3 million and €258.9 million respectively.

Net financial costs were €27.4 million, slightly up (€2.0 million) vs. the first nine months 2019, mainly due to exchange rate differences and negative effects in the fair value of financial assets held in the portfolio, which more than offset a lower amount of interest charges comparing to the nine months of 2019, despite a higher average net debt, thanks to a reduced average cost of net debt.

Positive financial adjustments of €2.0 million, essentially related to the non-recurring liability management concerning the term loan subscribed in July 2019, aimed at benefitting from better financial terms and conditions.

Put option and earn out income (expenses) were positive at €15.4 million, mainly attributable to the non-casheffects of the remeasurement and discounting to present value of estimated liabilities for future commitments relating to the earn out in the Bulldog Gin acquisition, amounting to €16.4 million12.

Group profit before tax adjusted13 was €220.0 million, down -15.1%vs. first nine months 2019. Group profit before tax was €190.2 million, down -22.4%vs. first nine months 2019.

Net financial debt at €1,068.2 million as of September 30th, 2020 (€777.4 million as of December 31st, 2019), up €290.8 million, mainly driven by the acquisitions of RFD and Champagne Lallier as well as the investment in Tannico, the tax payment related to the disposal of Villa Les Cèdres as well as the dividend payment and the share buyback, for an overall amount of €461.6 million14, offsetting the positive free cash generation. The net financial debt as of September 30th was slightly up (€6.7 million higher) vs. June 30th, 2020, with positive free cash flow generated in the third quarter offsetting the accelerated share buyback program (€116.3 million in the third quarter15).

After the nine months period closing, on 6 October 2020, the Group completed the issuing of a new 7-yearEurobond of €550 million at a coupon of 1.25%, thanks to which Campari Group will further extend its overall debt maturity profile and improve its average nominal coupon for bonds and term loan from 2.15% to 1.42%.

Net debt to EBITDA adjusted ratio at 2.4 times16 as of September 30th, 2020, unchanged compared with 30 June 2020,

up from 1.6 times as of December 31st, 2019.

1. Or €(16.1) million in 9M 2020 due to exchange effects.
2. Minor variance vs. H1 2020 (€16.8 million) due to exchange rate effect.
3. Before operating and financial adjustments as well as non-recurringearn-out liabilities revisions, totalling €(29.6) million in 9M 2020 (vs. €(13.9) million adjustments in 9M 2019).
4. Of which acquisitions of €126.6 million, share buyback of €212.3 million, tax payment related to the disposal of Villa Les Cèdres of €60.1 million and dividend payment of €62.9 million.
5. Including the redomiciliation transaction related shares acquired for an overall amount of €64.7 million.
6. Calculated as net debt at period end divided by EBITDA adjusted for the last twelve months.

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