* Costs for new initiatives in U.S., Spain hit margins
* Comparable sales up 3.8 pct in first half before forex
* Italy, Latin America perform strongly in first half
* Shares hand back early gains to trade down 1 percent
(Recasts with margin forecast, company comments, updates
By Agnieszka Flak and Valentina Za
MILAN, Aug 5 Italian drinks group Campari
cut its full-year profit margin forecast on Tuesday,
blaming the cost of its expansion plans in the United States and
Spain and overshadowing a pick up in underlying sales in the
The maker of the eponymous bitter red aperitif said on
Tuesday it was now aiming to achieve a flat gross profit margin
"We had initially indicated an increase of 70 basis points
in the gross margin as a percentage of sales, which we won't be
able to achieve," Chief Financial Officer Paolo Marchesini told
analysts, blaming cost overlaps linked to new production and
distribution initiatives in the United States and Spain.
Full-year operating profit at the maker of the bright orange
Aperol aperitif, previously expected to be flat as a share of
sales, is now seen down by 70 basis points compared with the
Campari earlier reported flat first-half pretax profit as a
recovery in underlying sales in April-June, mainly in Russia,
Jamaica and Australia, made up for weaker shipments at the start
of the year.
After rising as much as 4.3 percent in the wake of the
results, Campari shares had retreated to trade down 1 percent at
5.775 euros by 1435 GMT, compared with a 1.3 percent weaker
Milan blue-chip index.
"The organic sales growth was strong in the second quarter
and beat consensus, and the Italy recovery appears to be
continuing, which is encouraging," a Milan-based analyst said,
but asked not to be named.
Comparable sales in the first half rose 3.8 percent before
currency swings. Sales were down 1.8 percent to 686 million
euros ($917 million) including the effect of exchange rates as
well as of acquisitions or new distribution agreements.
Campari said underlying sales had recovered in most key
markets, with growth driven by its aperitifs business, after
first-quarter earnings were hit by a slowdown in Russia,
shipment phasing in the United States and a late Easter which
pushed deliveries in Europe into the second quarter.
"We are confident that the overall positive organic sales
trend will consolidate in the second half year thanks to the
normalisation of shipment trends across key markets," Chief
Executive Bob Kunze-Concewitz said in a statement.
Sales in Italy, which make up just under a third of the
group's shipments, were up 8.7 percent in the six months, but
remained weak in the United States, another key market.
"Italy performed strongly in the first half, as did Latin
America, driven by Brazil and Argentina," Kunze-Concewitz said.
"Importantly, a strong recovery in the second quarter was also
achieved in Russia, Jamaica and Australia which helped partly
offset weak shipments in other key markets."
Campari said January-June pretax profit was 91 million euros
($122 million) compared with 92 million euros in the same period
last year. Net profit was also roughly flat at 57 million euros.
The company's net debt stood at 1.1 billion euros at the end
of June, up from 853 million euros at the end of December.
($1 = 0.7481 Euros)
(Additional reporting by Sabina Suzzi and Valentina Za; Editing
by Mark Potter)