Pernod Ricard hails ‘very strong’ third quarter sales increase

Pernod Ricard’s finance director Helene de Tissot today hailed the French group’s 20% increase in organic sales in its third quarter (January to March) as “very strong”.

The figures, which exceeded analysts’ expectations, pushed Pernod Ricard’s organic sales in the first nine months of its year to 18% above the level of 12 months ago.

As a result, despite increasing uncertainty about inflation, the war in Ukraine and the Covid lockdown in much of China (the group’s second largest market), Pernod Ricard expects organic growth of 17% in profit from recurring operations for its financial year ending June 30, in line with the current market consensus.

The figures underline the strong sales growth trend seen among the global beverage producers since Christmas.

In the first nine months of its year sales to its largest market, the USA, rose by 13%, India put on 19% and China gained 12%.

The group also reported “excellent growth” in Europe but that has “decelerated” since the war broke out in Ukraine and all transactions with Russia were halted.

The world’s second largest premium alcoholic beverages group said it expects softer sales in the fourth quarter due to COVID-19 disruptions in China, gradual normalisation in U.S. business and the Ukraine conflict.

In the United States, sales rose 23% in the quarter, lifted by solid demand for Jameson, Malibu, Kahlua and Martell cognac. Broad-based price increases had been taken in early February and innovations such as Jameson Orange also helped U.S. sales.

The French group was unable to increase the price of Absolut in the US as the brand continues to face problems in the troubled vodka sector.

De Tissot said that Pernod Ricard had been sending larger than normal stocks from Europe to the US to help alleviate distribution pipeline bottlenecks and extra shipping costs. Levels of stocks with distributors are expected to normalise within the next three months.

In China, sales in the third quarter grew 8%, slowing from 14% in the first half of the year, with a softer Chinese New Year performance affected by Covid disruptions.
De Tissot said “she didn’t have a crystal ball” about possible impacts of the lockdowns in China, especially in the Shanghai region, but the group’s guidance is believed to allow for a decelerating sales trend in the fourth quarter.

Analysts noted that the world’s biggest alcohol group, China’s Kweichow Moutai, today reported a 24% jump in net profits for the first three months of this year on sales of $5bn. Even so, despite its stunning profit margin of more than 50%, its shares have lost more than 15% of their value in the past year and investors are watching events in China with anxiety.
Pernod Ricard’s sales in the important Spanish market are continuing their strong rebound within the European sector that increased sales by 20% in the first nine months of the financial year.

There were also good results in France and Germany. Britain displayed “good growth”, the company said, “benefiting from strength in the on trade, in particular Absolut, Jameson and Havana Club.

De Tissot would not be drawn on potential price increase for the UK market.

Summing up Pernod Ricard’s latest performance in a press release Alexandre Ricard, the chairman and chief executive, said: “Our Q3 was very strong and continues the broad-based performance we enjoyed in the first half, with all our regions and must-win markets showing very strong growth.

“The global environment remains volatile with an increasingly challenging and inflationary context. We expect a softer Q4 impacted by Covid disruptions in China, phasing normalization in the US and conflict in Ukraine.

“Overall we expect for FY22 [to the end of June] a strong diversified sales momentum across the regions due to on-trade rebound, off-trade resilience and a continuing recovery in travel retail.

“We are increasing investments to fuel growth momentum.

“Accordingly we are providing full year guidance for FY22 of an organic growth in profit from recurring operations of about17% with some operating margin expansion.”