February 27, 2018 / 4:24 PM / a year ago

UPDATE 1-Campari's earnings rise but 2018 guidance disappoints

(Recasts with conference call, share move)

MILAN, Feb 27 (Reuters) - Italy’s Campari on Tuesday reported rising sales and profitability in 2017, thanks to strong demand for its bright-orange Aperol liqueur and eponymous red bitter, but subdued guidance for the current year weighed on its shares.

Sales rose 6.3 percent last year on an organic basis, the company said, partly crimped by exchange rate effects, reaching 1.82 billion euros ($2.23 billion), in line with the average estimate from analysts polled by Reuters.

“Looking ahead into 2018, our outlook remains fairly balanced in a still uncertain macroeconomic scenario for some emerging markets,” Chief Executive Bob Kunze-Concewitz said on a conference call.

“We remain confident in achieving a positive performance across the key indicators into 2018,” he added.

Shares initially rose 3.3 percent after the results were released, but turned negative and settled around 2 percent lower in the session.

A trader said the fall was due to “soft guidance for 2018”.

Named after the deep-red bitter which remains one of its key money-spinners, the group, founded in 1860 in Milan, has sold off a string of assets since 2016 and bought up brands including French liqueur Grand Marnier and high-end British gin Bulldog.

Aperol, once a niche product sold mostly in northern Italy, is now the group’s best performer, enjoying strong demand in Europe and growing popularity in the United States.

But rising prices for agave syrup which is a key ingredient in its Cabo Wabo tequila and losses at its Jamaica-based sugar business will halve the company’s gross margin growth to 60 basis points this year compared with 2017, Chief Financial Officer Paolo Marchesini said on a conference call.

Campari warned currency effects would trim 90 million euros off net sales and 24 million euros off adjusted operating profit (EBIT) in 2018.

Adjusted EBIT rose 8.7 percent on an organic basis in 2017 to 380.5 million euros, and the group proposed to raise its 2017 dividend payment by 11 percent to 0.05 euros per share.

$1 = 0.8159 euros Reporting by Maria Pia Quaglia and Isla Binnie. Editing by Jane Merriman

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