MILAN Campari's (CPRI.MI) strategy shift to focus more on the U.S. market helped the drinks group to report stronger than expected first-quarter earnings, lifting its shares to a record high.
Campari, maker of the red aperitif of the same name, bought Grand Marnier last year to expand its drinks range in the United States, its biggest market, which now accounts for 30 percent of sales. It has also been working on improving its U.S. distribution and strengthening its U.S. sales team.
U.S. sales of drinks that include Campari rose 7.5 percent in the first quarter, excluding currency swings and M&A activities. Sales also benefited from a shipment catch-up after a reduction in stocks at the end of last year.
Chief Executive Bob Kunze-Concewitz said investments in marketing and distribution network in the United States would help to cement the good run in coming quarters.
"For the whole year, we see U.S. sales up mid-to-high single digit (rate), depending on how the summer period will do," Kunze-Concewitz told analysts on a conference call.
In Italy, the company's second largest market, sales fell mainly due to a late Easter.
Sales in North, Central and Eastern Europe also rose, allowing the Milan-based group to report a 5.7 percent rise in overall organic sales to 376.6 million euros ($409.93 million), above forecasts for sales growth of less than 3 percent.
Campari's shares rose as much as 11 percent to 6.14 euros, their highest level on record. The stock was up 4.8 percent by 1454 GMT (10.54 a.m. ET), compared with a 0.6 percent rise in Milan's blue-chip index .FTMIB.
"Overall, this is a strong set of results from Campari that include above consensus organic growth on a tough comparison, in particular in the United States that is a key focus in the company's future growth strategy," said one analyst who did not want to be identified.
Among Campari's brands, the best selling product was Wild Turkey Bourbon, which increased sales by 24 percent overall, followed by the orange colored aperitif Aperol, up nearly 18 percent. French liqueur Grand Marnier, Campari's biggest acquisition to date, added 32.5 million euros to the group's net sales in the first quarter.
The company also said it reached an agreement on the "Patent Box" scheme with Italian tax authorities for 2015-2019 fiscal years, with an overall tax benefit estimated at 88 million euros over five years.
Adjusted operating profit rose 19.5 percent to 64.4 million euros, with a margin of 17.1 percent on sales.
(Editing by Jane Merriman)