Hello and welcome to the Rémy Cointreau Q2 sales conference call. Please note this conference is being recorded, and for the duration of the call your lines will be on listen only. However, you'll have the opportunity to ask questions after the presentation, and this can be done by pressing star one on your telephone keypad to register your question. You are kindly asked to limit yourselves to two questions only. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand you over to Luca Marotta, CFO, to begin today's conference. Thank you. Good morning, everyone. Thank you for joining us today. As highlighted in our press release, H1 s ales decreased by 4.2% organically. This performance includes an -11% decline in Q2, which should be, as expected, the lowest quarter of the year. It reflects some adverse phasing effect in a still challenging macroeconomic environment. This result stems from mixed regional trends, mainly driven by, on one hand, strong sales growth in the U.S. Cognac division f or the second consecutive quarter, supported clearly b y low comps but also improved sequential depletions. They are definitively improving depletion, but less than expected, and they are still negative. On the other hand, depressed Cognac sales in China were affected by an increasingly difficult market and unfavorable calendar effects due to t he shift of the Mid-Autumn Festival and some residual disruption in travel retail China. This effect weighed for 0.7 points in Q2 or in H1 1.4 points at group level. Specifically, the Q2 sales decline breaks down a s follows, volume decrease of - 4.7% and - 6.2% in price mix effects, largely driven by the underperformance of high e nd brands, Cognac, and some price adjustment. Now looking into the overall sales performance b y region, Americas recorded +12.8% sales growth in H1, including a slight growth in Q2, mostly driven by a solid, robust performance in Cognac. In parallel, the lack of experience division t urned negative, affected by adverse phasing in. Q2, but following a very strong Q1 and despite a resilient depletion environment, Asia-Pacific sales decreased by 14.8%, with Q2 strongly impacted by China, which is facing tighter market conditions and an unfavorable Mid-Autumn Festival calendar effect. At the same time, the rest of Asia g enerated a mid-teens growth over the quarter. EMEA region declined by 9.2% p osting in Q2 a similar performance to Q1 in an environment global markets still a ffected by subdued consumer demand. This was sell-in. Now let's talk H1 value depletion estimation at group level. The best approximate, what is the final sellout in the U.S., value depletion declined by mid to high single digit y ear on year, including a decline of m id single digit in Q2, improving compared to what we recorded in Q1, but still negative compared to pre-Covid six years ago H1 value depletion are down mid to h igh single digit, but stripping out the VSOP range, they are + 40%. I n China v alue depletion d own mid-teens year on year in H1 and up by 18% versus H1 2019-2020. B eyond unfavorable calendar effects in China t his performance is clearly disappointing for us and reflects tougher, more complicated market conditions. In EMEA, value depletion decreased by mid-single digit year-on-year, and they are performing more or less the same l evel negative mid-single digit compared to H1 2019-2020. What we can say overall i n terms of the sell-in, sell-out equation at group level, we can say that H1 value depletion fell by high single d igit year on year, more or less -8 underperforming clearly spatially selling trends that were -4.2%. Why? Because essentially the U.S. restocking from a very low base without increasing level of s tock waved positive on selling, even if depletion dynamics were still improving but still negative. To conclude on this very first slide, considering all that, we have decided to l ower our full year organic guidance. I will come back to the main d rivers at the end of the presentation. All in all, we now expect the o rganic full year sales to be between s table and up low single digits. While we expect organic full year COP t o decline low double digit to mid-t eens, the later one clearly includes the estimated impact from tariffs in the U.S. and price undertaking in China. Page just number from 3 to 5. I would like to come back very briefly on the main marketing initiatives of the quarter. Let's start with LOUIS XIII, which is a s tandard brand universe beyond tasting w ith the launch of its very first Art de la Table collections. T he initiative is fully a ligned with our long term strategy to reinforce the Maison positioning at the very t op of luxury, to enrich, complete the c onsumer journey and to create new opportunities f or differentiation across our freestanding store, robotics, and key markets. T o bring this project to life, LOUIS XIII partnered with Chef Alain Passard, a T hree Michelin star Chef at L'Arpège in Paris. This collection was created in partnership with the French porcelain house J.L. Coquet. Each collection consists of six pieces to s tart with, designed and crafted by over 40 artisans. They translate two of the Maison founding pillars, terroir and tile. From a commercial standpoint, this launch also plays a pivotal role in animating our boutiques, enhancing visibility, and driving traffic. Overall Art de la Table reinforced the brand's cultural equity, expands its experiential ecosystem, and underlines our ability to innovate i n the Codes of Ultimate Luxury. P age number four, I'd like to highlight our last innovation and it belongs to the brand Cointreau. It is entering Cointreau i n a new territory this year with t he launch of its very first Cointreau Ready- to- Serve Spritz in the U.S. Why Ready- to- Serve rather than Ready- to- Drink? Because Ready- to- Drinks represent close to 12% of the alcohol market. Ready- to- Serve remains a fast growing n iche today, worth more than $0.5 billion in the U.S. and actually outpacing Ready- to- Drink subcategory in terms of growth and potential. Ready- to- Serve cocktails are strongly associated with hosting occasions when consumers want both convenience and the ability to impress. We see clear spikes in sales around the holidays, confirming that Ready- to- Serve h as become a trusted solution for entertaining, looking ahead to grow through premiumization, flavorful proposition, and ease of consumption. Our objective with this launch is to e xtend Cointreau footprint into new daytime occasions t o recruit younger consumers who are seeking c onvenience, to modernize even more the image of the brand, and to gain additional shelf visibility in a highly competitive and crowded environment. The product itself has been carefully designed a s a ready to share 750 mL bottle at 10.5% ABV, it comes with three variants: orange and blood orange, lemon and lime, and grapefruit and tangerine. Each recipe is crafted with Cointreau, French white wine, citrus juices, and natural f lavors, but without any artificial flavors or colorant. Consumer testing results are excellent. We launched end of September two flavors a cross nine key U.S. markets with a e etail price of $19.99. Distribution is already confirmed in more than 1,000 points of sales in terms of numeric distribution through major liquor chains and Celine is ongoing to support a national progressive iterative rollout including the third flavor in March 2026. Lastly, for the marketing and colorful experience i n front of the business and brands. On page number five, a few comments o n a minor point, which is Mid-Autumn Festival in China, 25% in terms of w eight of our sales in China, so it's a very important one. It was clearly joking during the Mid-Autumn F estival, our priority was to sustain demand e ngagement in what is a softer consumption environment, even if first result showed that w e continue to gain market share. I'll be back on that point even more in the Q&A session. We therefore focus our effort on a few high-impact, cost-efficient activations designed to keep our brand visible and relevant d uring this key consumption moment. Starting clearly with the Rémy Martin Club. Celebrated the brand's 40th anniversary with a strong integrated campaign running from August to October. We leveraged our Brand Ambassador Li Xian across d igital social live stream channels building strong r each and engagement at limited cost. Limited edition design and creative gift-with-purchase mechanics have stimulated the sales across key markets, including mainland but not only a lso, Hong Kong and Macau campaign generated a lot of press clippings and high immediate return GMV from live stream session a lone confirming good consumer traction despite the m uted and depressed environment. At the same time, Rémy Martin XO g ained exceptional visibility in Mid-Autumn Festival i n China with the launch of the Anish Kapoor Limited Edition, a creative collaboration reinforcing t he brand prestige and desirability. A ltogether, t his initiative allowed us to maintain strong brand visibility and support our partners during the p eak season and reinforce confidence among distributors. They also demonstrate to stay disciplined and impactful in our marketing investments, keeping our brands aspirational while driving the best we c an set out efficiency during a very and more challenging festival season. Turning now to slide number six. Turning to numbers, H1 sales amounted to EUR 489.6 million, representing year on year d ecrease of EUR 44.1 million or - 8.3% on a reported basis. This performance was shaped by the following factors. First of all, an organic decline of EUR 22.3 million, which is -4.2%. Its performance is split between +2.4 of p ositive volume effect and - 6.6% of price mix. Price mix negative impact results from a slightly negative pricing effect and low to mid-single digit negative mix effect. Why? This is linked to the underperformance of high-end products inside any given brands and c learly by the Cognac division performance c ompared to the weighted average. Second, a negative currency translation impact of 21.7% or -4.1% loss, mainly driven b y deterioration of the U.S. dollar, which a ccounted for -$11.3 million w hich accounted for EUR 7.9 million. Let's now turn to slide number seven. [Delve] into organic trends by region. Let's start with the Americas, in which organic sales increased by 12.8% in H1. That is down more or less 15% o n a six-year basis. This year-on-year performance includes a m id-teens growth in volume and a l ow single digit negative price mix impact, reflecting an unfavorable mix, first of all and s ome adjustments on the COP. In th e U.S. sales grew by mid-single d igit increase quarter Q2 driven by a s trong performance in Cognac linked to a low base of comparison and a continued s equential improvement in value depletion, not as much as expected but improving nonetheless. In this context, inventory level in the U.S. remain close more or less to f our months at the end of Q2. Canada sales were down mid to high s ingle digit in the quarter, impacted by p hasing effect between Q1 and Q2. Why? Because overall sales were up high single i n H1, and LATAM, Latin America sales were also affected by phasing, a effect between Q1 and Q2, down strong double digit in Q2, u p strong double digit in H1. Canada and LATAM a bit of p hasing between them between Q1 and Q2. End of September, Americas big region accounted for 39% of group sales, increasing 5 points compared to the previous year c learly, + 12.8% in top line compared on average performance, - 4.2%. Turning to APAC, Asia- Pacific organic sales d eclined by 14.8% in H1, that's c learly increased by more than 20% on a six-year basis. On the short term, China is p erforming negatively compared to the Americas, but if you compare the two biggest regions t o six years ago, the dynamics are reversed. Analyzing the volume value equation of APAC, the performance was impacted by high single d igit volume decline, while the value part was negative and more than mid-single digit. Driven by the underperformance of the high e nd brands and more promotional activity. I n C hina sales were down approximately -25% i n Q2, impacted by tighter market conditions, discipline, and austerity measures, which should lead to a global overall as a market soft Mid-Autumn Festival, this performance reflected an u nfavorable calendar effect and some residual disruption in travel retail. If you compare this technical effect to a pack level only, not a group level, we have 1.5 points negative impact in Q2 and 3 points in H1. This technical threat will normalize from Q3 o nwards by channel, direct e-commerce was the only growing channel in China, with sales up more than 10% in this q uarter bringing the overall e-commerce ecosystem p enetration rate at the end of the H1 at more or less 25%. This was selling in parallel g lobal value depletion in China was down m id- teens year on year and up 18% versus 2019-2020. Once again, during Q&A, we talk about the calendar effect and what is a more normalized performance. G iven d epletion and relying with sell-in trends in H1 inventory levels in China remained healthy a t more or less the same l evel before at the end of September. Compounders are saying the same things in terms of stock coverage. A s we were in the region, r est of Asia showed a strong improvement compared to Q1, posting a mid-teens s ales growth in Q2 led by Cognac t o a lesser extent, by the Liqueurs & Spirits division with two growth regional [and general], this quarter, Australia and Japan. End of September APAC accounted for 39%, t he same weight of the Americas i n this case it's down 5 p oints compared to the prior year. Last but not least, EMEA, in which organic sales were down 9.2% in the H1, and more or less we are d own -10% compared to 6 years ago, p rimarily reflecting a negative value effect. I nside t hat we need to analyze by subcluster, subregion within Europe. Let's start with what we call the t hird party distributors region 3PD recorded a mid-twice single digit s ales decline in the quarter impacted by Germany and Greece. I n parallel Czech and Poland, Czech Republic showed good momentum in the quarter. quarter. O verall. Talking about METAXA, was strongly up and Cointreau gained market share in many markets, but the category is declining, partially offsetting t he rest of the portfolio. Second subcluster U.K. Nordics sales turned positive a t low single digits in the quarter, showing solid sequential improvement versus Q1, led by Cointreau, Mount Gay, and The Botanist. The performance reflected signal rebound in Cognac v ersus Q1, which was almost flat Q2 rebound still cumulative on the H1 negative for the [quarter]. Benelux & France, sales were clearly declining a strong double digit in the quarter, impacted by competitive promotional pressure in Cognac and s ofter trends in Liqueurs & Spirits. Last but not least, in AMEI & CIS sales were down low double digit in Q2, impacted by Rémy VSOP performance, while the launch of Rémy VS in South Africa and Nigeria is giving and bearing some promising fluids. I n H1 value depletion. T alking about sellout declined mid-single digit year on year and on COP b asis, excluding Russia, is more or less the same performance. Overall, inventory levels remain healthy across most a reas and end of September the EMEA region accounted for 22% of group sales, which is stable compared to the previous year. Let's now turn to slide number 8 and the analysis by division. S tart with the [queen division] which is Cognac. Cognac division posted an organic sales decline o f -7.6% in H1 driven by a 0.7% increase in volume. Volume Cognac were positive and a n egative price mix of 8.4%. End of September, Cognac accounted for 61% o f our sales, down 2.5% compared to the previous year. Starting with the APAC, only cognac. I n Mainland China sales declined by around - 25% the quarter. It's the same performance if you c onsider the global portfolio or all cognac in China that is emitting decline in H1 but up more than 60% v ersus H1 2019-2020 comes clearly overall over t his year we are building some blocks t hat are not clearly high. This performance has been affected by tighter m arket condition including a stricter discipline, austerity measure, which clearly do not allow consumer c onfidence to recover quickly. In addition, the sharp decline includes an u nfavorable calendar effects from the late month, as well as recent travel retail disruption. Now on a path during the Q3 on normalization. In this context, an indirect channel remained [unchanged]. While direct e-commerce was the o nly growing channel turning up, increasing its performance more than 10%. A s were in China, Hong Kong and Taiwan reported weak performance i n both sell-in and depletions, impacted by same challenges in China. Macau, even from very low figures, was s trongly upped by clearly favorable phasing p romotion, but a little more dynamism. Overall H1 value depletion in China was i n line with the Celine, so down mid-teens on a six-year basis. This is equivalent to a +20% growth. The remaining part of Asia says we are up strong double digit in the quarter i n Cognac led by Australia and Philippines. I n Americas l et's begin with North America. The combination of U.S. and Canada. Cognac sales were up by mid-teens in the quarter, supported by a low base of comparison and continual sequential improvement i n depletion, mostly in volume. Q2 specifically f or the U.S., value depletions declined by mid-twice single digits, of which down low to mid in volume, mostly driven by Rémy Martin VSOP improvement. Given this factor, Cognac inventory coverage still c lose to 4 months at the end o f Q2 and on 12 months basis v alue depletions also include - 5% or negative price mix effect year on year, but on a six year basis p rice mix remains very up at +11%. Latin America, the remaining pieces of Americas sales, were down for Cognac by strong double digit in Q2, impacted by negative phasing. Sales were up by very strong d igit strong double digit in H1 driven by V SOP and LOUIS XIII and then the third region inside the Cognac in terms of weight EMEA, in which s ales decline by mid- teens in Q2, affected by very strong and competitive and promotional pressure across most major markets and s oft demand. U.K. and Nordics said that were flat in the quarter given by LOUIS XIII, Rémy 1738, in a category marked by intense promotional activity. Europe third-party distributor was down by double digits, mainly due to Germany, where the market remains very soft and highly p romotional and at the end NI sales decline by mid-teens, even if early r esults are encouraging for Q3 following the l aunch and the follow-up of yes in South Africa and Nigeria. Last but not least, H1 ME average depletion were down for Cognac double digit year o n year down very strong double digit versus six years ago. Now let's talk of the remaining more o r less 40% of the sales because 61% was a cognac in which we have for 37% Liqueurs & Spirits. Slide number. Liqueurs & Spirits division reported a +4.1% organic sales growth in the first half, driven by a very solid volume increase + 5.2% and a slight minor negative price mix effect of -1%. End o f September, Liqueurs & Spirits accounted for 37% of sales, up 3 points. Let's now review the division performance s ub-region, and let's start with Americas and North Americas, in which sales were d own by mid-single digit in the quarter, affected by adverse phasing a fter a very, very dynamic Q1. S ales w ere up high single digits in H1. Both key brands Cointreau and The Botanist d elivered solid performance over the semester, supported by a resilient depletion, the success of their latest campaign, the recent launch of the Cointreau Ready- to- Serve Citrus spirits. In parallel, Cointreau in the bottom Q2 U.S. value depletion, so best approximately were f lat year on year in terms of p rice mix was down only 1 point compared to last year for the 12-month period in September, and an increase 18 point on a 6 year basis. Latin America sales were down by strong d ouble digits in the quarter in a ofter consumer environment for Liqueurs & Spirits. Second region in terms of weight for Liqueurs & Spirits is EMEA in which sales d ecreased by mid-single digit in Q2. Declined, affected by all sub-region e xcept the U.K. while H1 value depletion w e're up slightly year on year, breaking d own sales down further. U.K. and others posted a sequential improvement w ith sales up by mid-single in Q2 led by Cointreau, which is gaining market share. Mount Gay, which is benefiting also from a l ower ABV for version of Eclipse and Botanist will continue to secure new distribution l isting and Europe third-party distribution cluster w hich sales decrease by low to mid-single digit in Q2 impacted by Germany, Greece, and Spain. In parallel, Poland, Czechia, and Romania fostered strong momentum. O verall In terms of brands, the solid growth f rom METAXA, St-Rémi and Mount Gay partially offset the impact of a softer consumer environment. Finally, the Americas and France were down by strong double digits in Q2 while AMEI & CIS was down only by mid-single digit. The third region by weight is APAC, in which China sales were up by low double digit in Q2 driven by Bruichladdich and The Botanist. In terms of value depletion, H1 value d epletions were up slightly. The remaining part of Eurasia was up mid-single digit in Q2, driven by Australia and Japan. Strong momentum for Bruichladdich, notably the release o f the Octomore series 16 in Japan. The further market share for Cointreau in Australia and New Zealand. This was 37% of our sales, Liqueurs & Spirits division, so i f you combine 37%, Liqueurs & Spirits 61%, which is Cognac, doesn't give 100 because we have non-group brands which represent now more or less 1.5% of group sales. Sales were down 0.5 points year on year, 1.5% compared to 2%, and they recorded a very strong decline in H1 of - 35.7%, mostly affected by the n egative sharp negative performance of good rents in Benelux and the U.K. To conclude, let's now turn to slide n umber 10, which I think is an i nteresting one for a few comments on o ur lower guidance for the full year 2025-2026. The deterioration of market conditions in China and the weaker than expected sales rebound i n the U.S., even if it's positive, but it's weaker than expected, have led ourselves to revise our assumption for the year. F or China w e had already adopted [Bernstein]'s assumption for China, and we're anticipating a slight annual decline. However, market conditions have further tightened following t he implementation of the new alcohol consumption r estriction for official while increased strongly increased p romotional activity is also prompting us to s how greater flexibility on pricing. Regarding the U.S., we still expect a strong growth for the year, supported by the continued ongoing improvement in depletion, but this is clearly not enough to maintain the initial forecast for the U.S. Consequently, we now expect group's organic sales g rowth to range between flat and l ow single digit, and before was mid-single digit. I n this context, we now expect the group's organic comp to decline between low d ouble digit to mid- teens, and before was mid-single digit decline. B eyond the r evised top line, which is clearly the t rigger of the margin deterioration I'll be back on that point in Q and A, because we have to remember the weight of the top line, m ore or less EUR 1 billion and the weighted operating profit of last year more or less a bit more than EUR 200 million. We are on a scale of 1 to 5. B eyond the revisit top line t his new guidance reflects the fact that w e intend to support the recovery of the underlying depletion sellout, which is clearly improving in some key regions like the U.S. Continuing our investment in AMP with t he sales ratio maintained at the level before pre-COVID. We are not doing also mad t hings as well, keeping a tight control o ver our overheads cost while maintaining strict operational discipline. Remember that in the last two years we already made a strong cost cutting, so in the end we need also s ome people and operational OpEx to be able to favorite and contribute to the r ebound or otherwise the rebound will be weaker. In parallel, we have updated tariffs net i mpact to EUR 25 million on COP in line with our lower expectation in sales o f which EUR 5 million in China and EUR 20 million in the U.S. net impact. These estimates include the mitigation plan. The gross effect is clearly higher which a ccount for the 55% more than the h alf the gross impact as well as, as I already said, an increased AMP support in China and the U.S. to favorize the rebound. In addition to this organic performance, there are also additional negative currency effects, which remain very negative and highly volatile. While our hedging policy helps to mitigate part of the adverse impact, the recent evolution o f the dollar and the RMB leads us to expect now on sales between EUR - 50 million and EUR - 60 million. In terms of translation, top line, which i s unchanged compared to our previous estimation, 40% of this impact should occur in H1 and 60% in H2, and operating profit between EUR -25 million to EUR - 30 million, b efore it was EUR -15 million to EUR -20 million. Two thirds should be booked, realized in t he H1 and 1/3 in H2. Exchange rate volatility is likely to persist t hroughout the year, which is why I will continue to keep you updated in a ny occasion that we will talk, so six times a year. Thank you for your attention now I am happy and open to answer your question. Thank you, sir. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. If you change your mind and want to withdraw your question, please press star two. We kindly ask you to limit yourselves to two questions and please ensure your lines are unmuted locally when you'll be prompted when to ask your questions. To join the queue for questions, please press star one on your keypads. The first question today comes from the line of Laurence Whyatt from Barclays. Please go ahead, Laurence. Morning, Luca, thanks very much for the questions. A couple from me if that's ok. Just firstly on the guidance, I was wondering if you could give us a bit more detail on what specifically changed between the end of Q1 and now, and whether that was really the disruption in Q2 that caused you to make the change, or if it's more about your expectation for the second half of the year. Similarly, you talked around specifically the U.S. being a bit weaker, China being a bit weaker, travel retail not recovering in the way that you were hoping in the U.S. I was wondering if you could say if any of those were dramatically more than any of the others in causing you to make that change. You didn't really mention Europe in terms of your expectations versus where they were at Q1 with regard to the guidance change, and whether the changes in Europe have caused you to change your guidance as well. Secondly, you sort of flagged it when you were making your comments around the ongoing normalized performance in China and where that currently is. I was wondering if you could tell us where you think the current normalized performance is in the markets and whether you're seeing any let up of the government crackdown on alcohol consumption at all, if that's sort of reducing towards the end of the year, what you're seeing in the travel retail channel, if you're seeing a bit of an improvement in sell-in, and whether you think the soft Mid-Autumn Festival is going to lead to a soft Chinese New Year when it comes early next year. Thank you very much. Thank you so much Laurence for your question. They are very broad and wide, so I'll be a bit long. I will try to talk slowly because t hey are very important answers and questions as well. The change in the guidance, which is sales and profit warning because they are combined, has been driven by the f act that some key compounders to be a ble to deliver the sell-in were not supported enough, even if improving compared to our trajectory in terms of important drivers of the sales warning, because I repeat the operating profit is a consequence, but the main triggering point is the sales performance, which is not going the way we expected. It is, first of all, China, because Q2 was clearly worse in terms of performance of what we expected until mid to end of July. I will be back on this point. I don't want to confuse you, so I will remain very factual n ow, first is China, second is U.S. Even if it's growing, you have noticed that it's still growing. Cognac is performing, but depletion, even if improving, is still negative, with the mix with a slightly n egative compared to volumes. It is inferior to our expectation, the H2 big rebound based on the yields o f the mathematical restocking, if you don't have, I repeated many times, a solid and at least marginally positive depletion is more fragile. In this moment, in terms of d ynamics of the top line, we are well aligned. We need to align depletions as the reality is, which is improving but is not still positive with the top l ine to come. China, second, U.S. and third. You're right, I didn't mention because it is less important in terms of impact compared to China and the U.S. EMEA is growing the same way negatively. Clearly, EMEA, even if it's a lower impact, is not respecting its budget footprint as well. It's less important in terms of compounders. Sorry, I don't want to say t hat for the European people, but it's less strategic in terms of the quality of the mix. I repeat, these are the mechanics o n the warning in terms of sales, which is the first triggeri g point. The second point is the mechanics of t he P&L, because I read some first note by some analysts today, not you specifically, but some. Please remember relation 5 to 1. Now we are a company which is EUR 1 billion more or less top line, EUR 200 million s omething million in operating profits last y ear published rates, which is the organic base of this year, 5 to 1 when you decline top line of if you consider 0 is EUR 50 million from 5 to 0 sequence 2 is EUR 30 million y ou consider our gross margin expected t he decline should have witnessed in bottom l ine is higher than what we are highlighting. It means compared to some comments like Edward, Jefferies, for instance, there is not the leverage, quite the opposite, because the mechanical one should have been bigger than a switch from -5% to organically. Because then we would talk about forex w hich is something else. There is some leverage even if we a re maintaining our key investment. In terms of mechanics, you do t he exercise, you have EUR 30 million-EUR 50 million. You apply our gross margin, and you see that at the end we are declining to low double digits m id- teens. i f you consider that, you stretch at t he maximum, which is mid-teens, it is 10 points compared to - 5 to 200 is EUR 22 million. Mathematically, you have a leverage of something which is between EUR 10 million and EUR 15 million. Let's talk very analytically, so you can do your model. Clearly, you are very aware of the fact w e decline the impact of tariffs. Tariffs are giving everything equals EUR 5 million b ecause it was EUR 30 million. There's some marginal additional leverage. After the math, which was important, let's relook at the main engine of t he warning. Sales, repeat China, U.S. and t o a lesser extent, EMEA gross margin b ecause, even if the EUR 5 million are p laying positive compared to guidance in terms o f mechanics compared to previous year, China is more promotional. We want to continue to influence our improvement in depletion everywhere in the world a lso in the U.S., even if we a re not right at the right spot we want to be. We cannot give up looking only to the bottom line because bottom line is influenced by the top line. A s I said, the top line is t he first reason why we are reducing that. We don't want to unfuel too much. On top, don't forget that China in terms of cost of operation is m ore costly than previous year because price undertaking has been a relief compared to the anti-dumping, but it's clearly more costly. Don't forget that tax duties last year w ere 5%, this year at 10% because we're the exception. The cost of the business in C hina, everything equal, has increased. AMP ratio. W e are focusing to try to maintain it stable compared to the top line i n terms of weight, which is mechanical m eans that we need to save some money, because otherwise the rigidity of this line is bigger than the volatility o f the top line. Last point, we continue to apply s trong pressure and control over our overhead c ost as a percentage of sales, we don't have any big material f urther savings in absolute value, considering the big, big effort we have made in the last two years. You remember EUR 230 million, of which more t han EUR 100 million of reds in part o f that, they were temporary. There's a reintegration. This went off. All in all, these are the mechanics of the warning, I repeat, it is t he sales, and there is some leverage o n the structure of the profit and loss. Now let's get back to your question, which is, w hat is China and what's happening? Please forgive me, I need to be a bit longer. On that as well. Trying to remember all the points in China and l et's start with the negative evidence. Overall, Mid-Au tumn Festival on a market perspective is soft. It's soft because the temperature is more cloudy than expected. The austerity and measure has put a more complex environment and less confidence for the world sailors and for overall the ecosystem. We are operating in a more complicated environment. V alue depletion, where as we highlighted in Q2, more or less mid to 18% negative, but there is a mechanical effect of delay, more or less three weeks o f Mid-Autumn Festival despite the all n egative situation and also impact on Celine when we try to measure the real performance s tripping away this kind of calendar effect, real performance is less negative. We are still negative, but not to this extent. If we consider only specifically our Mid- Autumn Festival performance, we are positive. We are realizing volume depletion specifically for mid to high single digit. Meaning with the increase of promotional activity and the fact we are more skewed to the entry ranges of our portfolio, something between a flat plus for Mid-Autunm Festival performance in terms of value depletion. This is clearly not reflected in the Celine. Why? Because of the confidence, because of the cash pressure. Because this is weighing on the reordering patterns. The fundamentals in the Mid-Autumn Festival, even if I am very humble, are giving in value flat to positive value depletion and in volume positive performance in Mid-Autumn Festival between m id to mid to high single digit, clearly influenced by Club as a first tool. What's happening? What's that? I repeat myself and is the p roof is that direct-to-consumer sub-channel inside direct commerce, which is growing 10%, every time we are able to get out of this cloudy environment the c onsumer preference and choice seems to be a bit better for us in China compared to some other operators, because in the very tough Mid-Autumn Festival context, we are able to deliver growth. That means that retailers are increasing their s tock because according to final retail performance they are able to support it. It is not something that like in the past we can consider that they anticipate price increase because it's quite the opposite. Pricing power is far less than the previous year and quarters. More in the promotional TV, the fact that Tier 1 and Tier 2 are able to sell more s tock to retailers is a healthy signal combined to direct e-commerce. Once again, I'm very humble. I repeat the main trigger of the s ales and probably is China. I don't want to say that everything is going the right way. No, at the same time this warning is more a combination of evidence, transparency. We want to be credible to you, to highlight you in a very complicated situation, our performance, and don't give soft hopes for the future. At the same time, everything is not so black as it should seem, looking t hose aren't figures that are published. Sorry, I was very, very long and I hope I was clear enough, but it was important. In other words, China is the negative. rigger underlying compounders in China. The more issue to the consumer has less negative than that. Very comprehensive. Thanks, Luca. The next question comes from the line of Edward Mundy from Jefferies. Please go ahead, Edward. Morning Luca. Thanks for the presentation. Two questions for me. The first is your guidance seems to imply some sequential improvement in the second half. I know you're seeing underlying improvement within the U.S. and your commentary just now in Mid-Autumn Festival is probably from a sell-out standpoint, probably better than could have been expected. What gives you confidence that H2 sales will be better than H1 is the first question. Second of all, I think there's commentary from a profit standpoint that you plan to continue on investing ahead of the recovery in both China and the U.S. Clearly the impact from tariffs on a net basis is worth 11% or 12% to EBIT. You're reinvesting, you're taking it on the chin in terms of the tariff piece, but you're also cutting costs. Can you talk about that third element? What's allowing you to not see greater operating deleverage given the impact of the tariffs plus the investment. Thank you for your question. Our building blocks are clearly more moderate compared to the previous estimation in H2. In terms of math, once again. I start with the math part and then w e comment more qualitative. Q3 should be flat plus, so improving but n ot a mid one. The l ast quarter, coherent with the flat to low single digit, will be a double digit increase in Q4 on these very, very, very l ow comps for last year. What gives us confidence is the continuing i mproving on depletion even if they are calling. I'm talking about for all countries out of China, which is more complicated e rratic to analyze, and it is clearly something which is sustainable with an improvement in the second part of the year of depletion in the U.S. and major European country, but not clearly factoring the budget 1. We reduced as well depletion trends n ot only saline trends. We directly and indirectly are able to support this kind of journey with some more additional millions on A&P and specific OpEx, and also sometimes specific operation in terms of market share, in terms of penetration of top line, without changing t he gear, the picture of the weight of any given cost line compared to the top line. Top line is declining, but we are able to get still a leverage n ot a deleverage. I insist on that because otherwise P&L should be worse. It is not massive. We are talking about a leverage which is at the end between EUR 10 million and EUR 20 million. For a company like us, w hich is, n ow we are smaller, we have n o more than EUR 1.51 billion. Our boat, the sailboat we are w e are not a transoceanic boat n eeds to be able to hoist on sails when the wind is there. The point is that the wind mainly i n China, it is not yet there, even if our performance is better. We are confidence being very cautious i n terms of adjustment of the top l ine and depletion estimation forecast for the s econd part of the year. In terms of r hythm will be essentially on the Q4 because Q3 will be flat plus. In ROI i t is measured in a very artisan crafted way. I can say Franck is clearly very clear instructing ourselves to try to reinject additional money to be able t o have additional sales, even if they a re not so visible compared to our hopes because the environment is very complicated. It is a complex job to do because we are talking more in terms of what I get in term of s ales that otherwise will be avoided. The point is that if you u nlock this additional money, we are able to maybe lend plus two, and we are more on the cost cutting side. Plus two become the lowest brackets of the fork. As I said with the gross m argin we still have as a company i n terms of business model, top line is the first trigger. Top line. T op line. Top line. Now that we have EUR 1 billion company, top line is the most important one. Last point, exit rates inside all that, current trading in October. What's happening to give you some color in October in terms of sales without giving a specific figure because I can't. We are positive, and mainly more important in terms of value depletion U.S. depletion are improving, but still negative. EMEA and rest of Asia out of China are slightly up in terms of value, not volume. Volume is better. I n China t hey are very strongly positive, clearly very, very strong because t here is a boost to the positive calendar effect. If you normalize Mid-A utumn Festival on a comparable calendar compared to last year I repeat, apart from the YoY effect f rom the calendar, we are more or l ess in value depletion, flat plus flat to low single digit increase in China i n Mid-Autumn Festival and more positive volume because we are between mid to h igh single-digit increase. The point is to start to get confidence. Confidence is the wind. Is the wind for the sales and w e need to believe it i f there is nobody, we cut all the OpEx, then we cannot hoist that. Just on your commentary on Mid-Autumn Festival, obviously volumes ahead of value, but does that surprise you that it's as resilient as that given all the pressures in China from a macro and also sort of a regulatory standpoint? For us. You can say it's r esilient, yet there is a negative impact. Let me say five to eight points, which is, w hich is for us, it is something negative, very negative compared to our previous EBITs, and the environment in terms of competitive footprint is much more around 15- 20 points of value destruction. I agree with you, it's quite r esilient so far, at least in China. Promotional activity is increasing. That is the reason why in the prepared remarks I said very clearly that we need to be ready also to be present not only in pure AMP battle, maybe also in the promotional activity battle when we have a strong market share position to maintain in a c ountry in which one line is very i mportant for us, which is Club. More than Rémy Cointreau, Club needs to be protected. If there is a promotional war, we need to be a little bit m ore flexible than in the past because volumes are very important for us in China for cloud. Great, thank you. We will now take our last question, which comes from the line of Chris Pitcher from Rothschild & Co Redburn. Chris, please go ahead. Yes, good morning, Luca. A couple of questions. Firstly, on the U.S. price mix which is now cycling the period of negative momentum, are you able to give us a bit more color on that negative price mix? How much of that is you being more competitive as you've referred to, how much of that is perhaps negative mix within the portfolio or channel mix? When we should think of that price mix potentially stabilizing. Secondly, again coming back to the margin point, the largest supplier in the industry is reporting operating margins that are materially below the previous lows for the industry. Have you and Franck had a chance to really rethink the fundamental profitability of your cognac business? Particularly in light of the comments you've just said around the higher cost to compete in the U.S. A nd China and the need also to invest in new markets to generate growth? Should we expect at the first half results a more comprehensive review of what you think the real longer term profitability of this business is now, or is it still too soon with the complex market backdrop? Thank you. Thank you. Very important question. Price mix negative in the U.S. and the Cognac, it is negative because you remember price adjustment in V SOP, which is now bearing some fruits in most states t he more fighted one, take the example of Illinois, $49.99. We are cycling that it is more installed in 12 months. Some price adjustments made on XO and also a mixed effect because the high e nd the segment underperformance. O n LOUIS XIII as well. Even if we don't dig into many details, LOUIS XIII also is quite yo-yo in terms of valorization, not because o f the price, because that one y ear you have some special edition, you have a red cask year after you have less red cask is playing a role very, very, very, very easily, and the price reposition of Rémy. All in all, this deterioration of the price mix in the U.S. has been c ycled what we have to expect, and when we land, we still need to b e very cautious in terms of pricing superiority, pricing increase in turn on of price per price or price plus mix, because the environment is still very promotional. We are not in some fight category. At the same time, we cannot sing totally another song inside this environment, so will be adjusted and will be recovering progressively. I will not bet in the next 12 months to have a price mix turning positive in the U.S., both on sell-in or in depletion. What does it mean? You have heard also my subliminal messages that we are compared to the previous past without denying the strategy. Strategy not changing, but also listening and w atching more attentively to volumes, absolute value more than profile. Which brings us to your second question: Marginality, business model, group, and vision of the future. I can't answer that because clearly it's p art of the urban what needs to Franck to assess with us with all the teams during next month. It is very complicated to do that when you have a very complicated period like this one, which disturbs our ability to be totally focused on the medium to long term. We are a company to be long term. At the same time, the short term issues are quite annoying. Clearly something that will be addressed with Franck, during next month quarters, as so far I cannot answer for that because i t will be only a personal point of view, which is not yet discussed, and if there is a reset, it needs to be embedded by Franck and validated by the board of directors. Today, we are not there. Would it be fair to say that we don't have a clear view on how the competition are acting, and therefore it's very hard in a way to assess what the real cost of competition is? Because it's still very uncertain out there. Particularly as you mentioned. In terms of business model as a group or in t erms of action in the U.S.? Mo re globally. How the big players Hennessy, now Courvoisier, responding to get their own volumes moving. We have some hints, we have some ideas. It's part also when I said it belongs also clearly, not also frankly, the board of directors because we have some hints, we have some discussion. We look into what the competition is doing. Is some adjustments necessary to us? That is part of the final footprint, the final output that is not yet ready. We are looking at that. We are looking at the dynamism in our brands. We are looking at their obsession, their change of gears. Yes, we are looking into that. No new plan has been decided or approved by the board of directors so far. Okay, thank you very much. This ends today's Q and A session. Handing back over to you, Luca Marotta, to conclude. Thank you so much for your attention today. Today was a sales conference b y the end, turned out to be much broader because of our warnings both on sales and on profit. Even if this is the most important part, I insist, is the sales element. The second point is that if you look at added number like they a re situations not getting also some positive hints that are there? First of all, improvement in the U.S. E ven if not the scale of what we expected, second, on a comparable basis our performance on the field in China is less negative. Sometimes positive in a moment, which somebody else is doing - 20%, -25% on the field. Europe is still softer, but is less strategic in this configuration. All these points, including the guidance and a more strategic point of view that I'm not ready to give today because it's not my job as well, will be d elivered during the first half conference call end of November with our CEO, Franck Marilly, and Marie-Amélie de Leusse. Thank you so much and have a nice day. Thank you for joining today's call. You may now disconnect your lines.