Pernod Ricard sees ‘very strong performance’

In the year to the end of July, Pernod Ricard beat expectations with what chairman and chief executive Alexandre Ricard described as a “very strong performance in a normalising environment”.

The French group’s organic net sales grew by 10% to €12,137m, while total sales growth was 13%. ahead of the 2022 level, partly helped by the strengthening of the US dollar against the Euro.

Some 80% of the organic sales growth was achieved by pushing through strong price rises. Extra sales volumes accounted for 10%.

The company achieved profits growth of 11% to €3,348m, sustaining its organic gross margin and expanding organic operating margins.

With an increased dividend, a rising share price and including the share buyback programme, shareholders an 18% increase in their total returns during the year.

The company announced a further share buyback programme of between €500 million and €800 million in the next 12 months.

Mr Ricard said: “Pernod Ricard once again delivered a very strong full-year performance. The relevance of our growth strategy, the desirability of our brands and the unwavering commitment and agility of our teams enabled us to gain share in most markets and strengthen pricing.

“We are making solid progress on our sustainability and responsibility roadmap to 2030. While the environment in FY24 remains challenging, I am confident in Pernod Ricard’s ability to deliver on its medium-term objectives.”

The group “confidently reiterated” its financial guidance to mid 2025 of aiming for the upper end of net sales growth of between 4% and 7% and increasing operating margins by between 50 and 60 basis points.

While predicting broad-based and diversified net sales growth in the next 12 months, Mr Ricard said there would be a “soft start” in the quarter which would be affected by the high comparative numbers achieved in the same period in 2022.

Growth in the next three months in the US is expected to decline marginally but then move into positive numbers over the rest of the financial year.

Mr Ricard said that in the year just closed Pernod Ricard had achieved “broad-based growth across all regions with strong pricing execution”.

Growth in the Americas of 2% was spearheaded by Mexico and low-single digit growth in North America, with stable net sales in USA.

Its Asia-RoW region grew by 17%, with broad-based growth led by India (which put on 13%) and the 40% recovery in travel retail, which is back to 90% of pre-pandemic levels.

Sales in China, which became “more challenging” as the year progressed and the economy slowed, grew by 6%. In Europe sales increased by 8% led by Spain and Germany and by the rebound in Travel Retail.

The UK put on 2% with double-digit sales gains from Jameson, Absolut, Malibu and Kahlua. Mr Ricard said that overall “all spirits categories delivered strong growth, especially the strategic international brands category which put on 11%. He said there was “strong momentum led by Scotch, Martell, Jameson and Absolut”.

He said that six categories were driving 85% of the group’s growth. They are scotch whisky which grew sales by 34% in the year, Irish whisky (+11%), cognac and brandies (+17%), vodka (+8%), gin (+5%) and Indian whiskies (+10%).

Despite the very positive results, Pernod Ricard’s shares fell by about 4% when they were announced.

Investors were disappointed by the predicted slowdown in the US over the next three months and by the prospect of sales in China falling.

“There is an economic slowdown in China, (and) difficulties in the property market … we are seeing some caution from wholesalers in China,” Mr Ricard told Reuters.

“China’s fundamentals however remain very solid,” he added, saying he was confident about the group’s ability to continue implementing price increases in the country.

Commenting on current Chinese consumer behaviour, he said: “Consumers are going out less … The channel suffering the most is on-trade. Night clubs are suffering big time, though we are seeing the emergence of live bars.”