Pernod performance pleases Pringuet

Pernod Ricard’s board were in bullish mood at the company’s annual meeting in Paris this week, revealing that in the three months to the end of September the French group had achieved organic growth of 10% for its top 14 strategic brands, which chief executive Pierre Pringuet called “a very positive sales mix”.

After achieving 4% organic growth with the overall portfolio in the year to the end of June, Pernod Ricard reiterated its guidance that full year organic growth from recurring operations by next June will be no less than 6%. Pringuet said it will be the “year of recovery”.

With gross margins on the top 14 brands now about 70%, Pringuet said they would continue to drive the group’s growth and would be given the marketing support to achieve the 6% organic growth target. He said that these core brands had grown at twice the rate of the overall portfolio.

The second objective, he said, would be to further reduce Pernod Ricard’s debt to a ratio of about 4 times earnings before interest, tax depreciation and amortisation (EBITDA). That is a level the group regards as normal, but following the Vin & Sprit takeover it jumped to 6.2. At the end of June the ratio stood at 4.9 following a €1.1 billion reduction in debt in the last financial year.   

Significantly, finance director Gilles Bogaert told shareholders that Pernod Ricard’s reduced level of debt through increased cash flow meant that it had completed its asset disposal programme. “Any future disposals will be strategic,” he said, not to further reduce debt. That would be achieved through increased profitability.

Observers noted that the target of reducing the ratio of debt to EBITDA to 4 by June 2012 effectively precludes Pernod Ricard from entering the takeover market in any significant way until then. Previously Pringuet had hinted that he might be in a position to consider additions to the portfolio next year.

Even then, however, there will be no targets in Champagne. One shareholder speculated that Pernod Ricard lacked “critical mass” in the region but Pringuet responded by saying that Mumm and Perrier-Jouët were part of the top 14 core of Pernod Ricard brands and that he was “very happy” with them. “Read my lips, none of the top 14 is for sale,” he said. He went on to assure the meeting that “Pernod Ricard is going to stay in Champagne for a very long time”, but that he was not in the market for any other brands or houses.

Finance on Friday, 12.11.2010