Pernod reports full year profit rise

Pernod Ricard has reported profit from recurring operations, the measuring stick that analysts and the company use, rose 2% during its fiscal year 2015/16 to €2.28 billion.

Chairman and CEO Alexandre Ricard said: “FY16 was a solid and encouraging year, delivering profit from recurring operations (PRO in line with guidance while maintaining investment and implementing significant initiatives to deliver our medium- term strategy and objectives.

"For full year FY17, in a contrasted environment, we expect to continue improving our business performance year-on-year vs. FY16, supporting priority markets, brands and innovations and focusing on operational excellence. As a consequence, our guidance for FY17 is organic growth in profit from recurring operations between +2% and +4%,” said Ricard.

Of Pernod’s top 14 spirits and champagnes, organic sales of Jameson was 16% up, Perrier-Jouët (+9%), Beefeater and Royal Salut (+4% each), Ballantine’s (+3%). While Absolut, Chivas Regal and Martell all declined by 4%.

The company reports that the improvement was mainly driven by the US and Spain:

• Americas: acceleration of growth +4% vs. +2% in FY15, notably driven by US (+4% in FY16 vs. stable in FY15);

• Asia-Rest of World: +1% thanks to double-digit growth in India and Africa/Middle East but difficulties in China (-9%), Korea and Travel Retail;

• Europe: improvement (+1% vs. stable in FY15) driven by Spain, with encouraging growth in most markets, but a ‘technical’ decline in France.

Initiatives to deliver medium term grow include:

•         Organisational changes to drive stronger performance;

•         Simplification of Americas region;

•         Creation of two management entities in Mexico and Brazil;

•         Creation of Global Travel Retail, reporting directly to HQ;

•         Finalisation of transformation of Pernod Ricard USA;

•         Adjustment of organisation in China to new market context;

•         Organisational changes in Korea.

Bloomberg News’s Thomas Buckley said: “Pernod Ricard SA  reported full-year profit that met analysts’ estimates on improvement in Spain and the US and forecast earnings growth this fiscal year.

“Pernod Ricard has acquired smaller, fast-growing brands such as Monkey 47 gin as sales of its flagship Absolut vodka in the US have slowed in recent years. Ricard, the third-generation family member to run the company, is also seeking to sell more Martell cognac and Chivas Regal whiskies to the emerging middle class in China as demand for high-end cognac in the country has dropped after a government crackdown on graft,” said Buckley.

The Wall Street Journal’s Nick Kostov commented: “Meanwhile, full-year revenue for the world's no. 2 drinks conglomerate after Diageo PLC rose 1% as strong sales of Jameson whiskey and Perrier-Jouet champagne made up for declining sales of Absolut and Chivas Regal scotch whisky.

“The earnings provide further evidence of an uptick in the spirit industry, with Diageo, Rémy Cointreau and Campari all reporting solid numbers this summer in comparison with struggling brewers.

“However, sales in the three months to June declined in all of the company's regions. Sales in its Americas region, dominated by the US market, fell 9% in the quarter, while its Asia/Rest of World regions dropped 10% and sales fell 2% in Pernod's home region of Europe.

“China also remained weak. The country, which was formerly a major driver of growth, saw its sales decline 9% over the fiscal year. Sales in China have declined since a government anticorruption campaign took hold in 2013 and discouraged spending on luxuries such as expensive liquor,” said Kostov.