Pernod Ricard cheers strong Asia demand

Drinks maker behind Absolut vodka beats bigger rival Diageo

Pernod Ricard, the maker of Chivas whiskey and Absolut vodka, beat its bigger rival Diageo in organic earnings growth this year, helped by a strong performance in Asia.

Organic sales rose 7 per cent, to €7.6bn, and profits from recurring operations 8 per cent – compared with 5 per cent at Diageo, the world’s leading spirits maker by revenues.

At Pernod, sales growth in mature markets was flat in the year to June 30, an improvement on last year’s declines of as much as 5 per cent in Europe. But the likes of China, India and Vietnam, which all produced double-digit growth, “remained the driving force for group growth”, said the company.

In the US, Pernod’s biggest market by sales, organic revenues rose 2 per cent, helped by an uptick in Absolut sales and the continued popularity of Jameson whiskey. But that paled in comparison to 12 per cent growth in Brazil – albeit from a lower base.

Europe’s “stable sales” came thanks to eastern and central Europe, which helped counteract a steep 33 per cent decline in Greek sales and a more modest slump in Spain.

Analysts at HSBC said the results were in line with expectations. Net sales, not adjusted for exchange rates, rose 8 per cent to €7.6bn, producing net profit from recurring operations that were 9 per cent higher at €1.1bn.

Pernod raised the dividend 7.5 per cent to €1.44. Shares slumped slightly in Paris on Thursday, to €61.87.

The company said its top 14 brands, which represent almost 60 per cent of sales, reached record-high volumes in the year, an achievement it attributed in part to innovative marketing.

Pierre Pringuet, chief executive, also credited the company’s decentralised model, in which product development takes place at brand level and many marketing and distribution decisions by teams in local markets.

Of the top brands, only Kahlua saw volume declines, a trend Mr Pringuet hopes to reverse this year after transferring responsibility for the brand to the team working on Absolut products.

He said trading so far this financial year “confirms the resilience of our markets”, but did not expect much relief in badly hit economies such as Spain. “There’s been no change there over the summer,” he said

The company, which has grown quickly in the last decade through acquisitions, said net debt stood at 4.4 times ebitda. Mr Pringuet reaffirmed plans to continue paying down debt – which stood at about €9bn at the end of June – until it reaches a multiple of four times earnings, a goal it expects to achieve next summer.

Some observers believe it will then look at Fortune Brands of the US, which is undergoing a break-up and which boasts a drinks portfolio that includes Jim Beam and Courvoisier.

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