Has the time come for Gruppo Campari to stop spending yet?

Has the time come for Gruppo Campari to stop spending yet?

At first glance, Gruppo Campari's Q1 figures, released yesterday (13 May), make for grim reading. However, the short term may not be quite so depressing for the company, provided it focuses less on M&A and more on integrating its recent buys.

A near-48% plunge in pre-tax profits in the first three months of 2014 came from an 8% dip in net sales. But, historically speaking, Campari's first quarter accounts for around 20% of full-year sales and only 13% of profits.

Of course, the late Easter - which slipped into Q2 this year - won't have helped the company's performance.

Indeed, CEO Bob Kunze-Concewitz flagged yesterday that the start of Q2 bodes better. "Net sales year-to-date to the end of April 2014 ... were back to positive territory in terms of organic growth," he said.

Encouraging signs can be seen in Germany, where the Aperol brand returned to growth after a torrid time recently, and in Italy, where "overall consumer confidence (is) improving slowly", according to analysts at UBS today.

Nomura is equally upbeat on Campari's prospects. "We believe that underlying momentum is better than the soft Q1 would suggest," a note said this morning. As well as the brighter signs in Germany and Italy, Nomura's analysts flagged "an improvement in Brazil local brands".

What would help Campari in the months ahead, Nomura suggests, is if it took a break from its recent shopping spree. "We believe Campari will remain an active consolidator in the sector over the medium term," today's note says. "However, with two deals now done this year – Forty Creek in March and Averna in April – we would expect the company to focus on integrating these before looking at further M&A."

Can Campari keep its hand out of the cookie jar in 2014?