Pernod Ricard sales surpass €9bn for the first timeBy Ron Emler
Pernod Ricard’s shares shot up by 1.25% when the Paris stock market opened this morning after it announced strong financial results for the year to the end of June.
The world’s second biggest distiller by sales saw profits increase by 13% in the year, pushing its sales above €9 billion for the first time, toward the top end of expectations.
Sales grew organically by 3.6% and profits from recurring operations rose by 3.3%, moving the French giant closer to its mid-term objective of achieving annual sales growth of between 4% and 5%.
The figures also confirmed the more buoyant trend among the global spirits companies following strong results over the past weeks from Diageo, Remy Cointreau and Moet Hennessy (part of LVMH).
Pernod’s figures were driven in the main by its ‘Strategic International Brands’ such as Jameson and Absolut, with nine of its 13 key brands improving their performance, especially Martell (sales values up 6%) and Absolut, which returned to growth for the first time in four years. Jameson continued its stellar performance, increasing sales by 15%.
Scotch whisky had a more difficult year with sales of Chivas Regal and Royal Salute both falling by 3% but Ballantine’s gained a similar percentage.
The crucial Americas market enjoyed 7% growth with Jameson blazing a trail and supported by Absolut’s increased sales after a difficult period. China, which is a key whisky market, returned to growth while sales in Eastern Europe improved notably. Pernod Ricard also enjoyed a strong year in its global travel retail division.
However, the market in India grew by just 1%, hampered by government currency changes and the disruption to trade caused by changes to roadside liquor sales.
Significantly, a third of the group’s sales growth came from innovation, which it defines as new products or variations of existing products, such as Absolut Lime vodka or Jameson Black Barrel.
Alexandre Ricard, Pernod Ricard’s chairman and chief executive officer, said: “FY17 was a strong year, delivering Profit from Recurring Operations in line with guidance together with an excellent cash performance. These results demonstrate that the strategic direction the Group adopted two years ago is delivering: growth is accelerating and diversifying through successful activation of our strategy.
“In FY18, we will continue to implement our roadmap, in particular focusing on digital, innovation and operational excellence. We are confident that we will continue improving our business performance. As a consequence, our guidance for FY18 is organic growth in Profit from Recurring Operations between +3% and +5%.”
Over the past few years Pernod Ricard has sought to achieve profits growth of between 2% and 4% and its own increase in expectations for the present year points to its own dynamism combined with improving global conditions, notably in the Americas.
In the year to July Pernod Ricard improved gross margins by 4%, which in turn helped to generate a huge 22% jump in free cash flow to €1.3bn. As a result the net debt to Ebitda ratio was further reduced to a comfortable 3.0, leaving the group plenty of leeway to make further strategic acquisitions as opportunities occur.
During the past year it bought majority stakes in Smooth Ambler bourbon, Del Maguey mezcal and Ungava gin and sold non-core assets such as Paddy Power Irish whisky, Frïs, the Domecq brandies and the Glenallachie distillery.
Since Alexandre Ricard took over as chairman and chief executive of the family business in February 2015, Pernod Ricard has adapted its business to appeal to millennial consumers.Mr Ricard said: “Millennials have moved from loyalty to one brand to loyalty to a repertoire of brands, which we call moments of consumption. They’re digitally savvy, they love innovation and they have developed a taste for new variations. They travel a lot.”