2008/2009 Annual Sales and Results09/03/2009
Strong sales and results growth, with the rapid and accretive integration of Vin&Sprit
Group share of net profit from recurring operations in excess of € 1 billion
Rapid and significant debt reduction
- Sales: € 7,203 million (+9%, organic growth stable)
- Profit from recurring operations: € 1,846 million (+21%, organic growth +4%)
- Group share of net profit from recurring operations: € 1,010 million (+13%)
- Group share of net profit: € 945 million (+13%)
- Decline in Net Debt/EBITDA ratio to 5.3(1) at 30 June 2009
Within a difficult environment, marked by a major financial and economic crisis, Pernod Ricard achieved a very good performance over the 2008/09 financial year, featuring:
- Strong sales growth, thanks to the Absolut contribution.
- Very significant increase in operating profit margin (profit from recurring operations / sales) to 25.6% (+250 bps).
- Sharp growth in group share of net profit from recurring operations (+13%), bolstered by the successful integration of Absolut and control of the average cost of borrowing.
- Strong debt reduction and significantly improved financial ratios.
● A very slight organic sales decline (-0.4%), within a difficult environment and despite significant destocking by distributors and retailers.
● A 2% negative foreign exchange effect, primarily due to the fall in the value of the Pound Sterling, the Korean Won, the Indian Rupee and the Australian Dollar.
● A strong 12% group structure effect, primarily due to the integration of Vin&Sprit from 23 July 2008.
The 14 strategic brands (excluding Absolut), declined by 4% in volume and were unchanged in value (2). 5 of these 14 strategic brands continued to report organic growth in value: Martell (+ 12%), Jameson (+ 8%), The Glenlivet (+ 7%), Mumm (+ 3%) and Havana Club (+ 3%). Conversely, Perrier-Jouët (- 11%), was severely impacted by its exposure to the US, where the champagne market proved especially difficult. Montana sales (- 13%) reflected a significant destocking effect, whereas consumption of the brand grew in its principal markets.
Otherwise there were very good successes on many local brands, the volumes of which increased significantly: Royal Stag in India (+22%), Something Special in Latin America (+18%), Wyborowa in Poland (+17%) and Clan Campbell in France (+8%).
Additional sales relating to Vin&Sprit totalled € 915 million over eleven months and seven days. In the US, the Absolut brand is in decline, impacted by a year of transition, including changes of distributors, destocking by retailers and the decline of the on-trade where the brand achieves a significant portion of its sales. Conversely, Absolut confirmed its strong growth in several other countries: Spain, United Kingdom, Poland, Brazil, France, Germany, Greece, Italy, Australia, and gained market share.
Over the 4th quarter 2008/09, consolidated sales amounted to € 1,646 million, which is an increase of 10%, reflecting organic sales decline of 3%, positive foreign exchange effect of 2% and positive group structure effect of 11%. The limited decline of 3% (2) over the quarter, following a third quarter which was severely impacted by destocking by wholesalers and distributors and had declined by 12%(2), confirms the strength and resilience of Pernod Ricard’s portfolio and commercial network. The foreign exchange effect, which turned positive by 2% over the fourth quarter, resulted mainly from the appreciation of the US Dollar and the Chinese Yuan, compared to the fourth quarter of the previous financial year.
Strong growth in the contribution margin of the portfolio
Advertising and promotion expenditures were up 5% to € 1,237 million. This is primarily due to the inclusion the Absolut.
Overall, the contribution after advertising and promotion expenditures rose by 15% to € 2,971 million and represented 41.2% of sales, an increase of 190 bps compared to the previous financial year.
Improvement in the structure costs / sales ratio
Outstanding growth in profit from recurring operations
All regions experienced growth in their profit from recurring operations:
- Remarkable growth of 17% in Asia/Rest of World (organic growth of 7%), notably resulting from dynamic sales of Martell in China and local brands in India and good performances in Australia, South Africa and the Middle East.
- Spectacular 51% growth in the Americas region, primarily due to the integration of Absolut and the favourable exchange rate. The US proved a difficult market, penalised by distributor and retailer destocking and declining on-trade consumption. However, Latin America and Canada reported an excellent year.
- 1% growth in Europe reflecting both a difficult situation in Western Europe and a good performance in Eastern Europe. However, the latter experienced a sharp trend reversal in the second half-year and an unfavourable foreign exchange effect due to the devaluation of the Rouble.
- Outstanding growth of 19% in France, due to the commercial performance of Ballantine’s, Mumm and Clan Campbell, as well as the significant increase in operating margin, related to cost reduction and the positive foreign exchange impact on Scotch whisky costs (fall in the Pound Sterling).
Foreign exchange movements had a negative effect on sales but were positive for profitability, due primarily to the fall in the currencies of two of our main producing countries: the Pound Sterling and the Australian Dollar. Over the full 2008/09 financial year, foreign exchange movements had a € 67 million effect on profit from recurring operations.
The integration of Vin&Sprit’s sales over eleven months and seven days generated € 272 million in profit from recurring operations for the 2008/09 financial year, thereby greatly contributing to Group growth.
Net profit from recurring operations
In total, the Group’s share of net profit from recurring operations amounted to € 1,010 million, a 13% increase on the 2007/08 financial year.
Consequently, net profit - Group share totalled € 945 million, a 13% increase on the 2007/08 financial year.
Debt and cost of borrowing
● The acquisition of Vin&Sprit and the exit from Maxxium and Future Brands distribution contracts
● The effects of the rise in the US Dollar (€/$= 1.41 at 30 June 2009, compared to 1.58 at 30 June 2008)
● The strong generation of free cash flow from recurring operations over the period of € 1,275 million including € 351 million related to the implementation of programmes for factoring receivables
● The € 1 billion share capital increase carried out on 14 May 2009
● The successful launch of an asset disposal programme
● The payment of cash dividends relating to the 2007/08 financial year
Note also that the Group successfully carried out an € 800 million bond issue, finalised on 15 June 2009.
The Group confirms that debt reduction remains its priority today, with the continuation of the asset disposal programme of € 1 billion (€ 700 million achieved to date, including the sale of Tia Maria for € 125 million in July 2009), and the generation of free cash flow from recurring operations of close to € 3 billion over the three years 2008/09 to 2010/11.
The average cost of borrowing came to 4.8% over the full 2008/09 financial year. The Group’s target is to reduce it to a level close to 4.5% during 2009/10.
Dividend: € 0.50 / share – Distribution of Free Shares
The return to the previous policy of distributing about 1/3 of net profit from recurring operations in cash is due to start with the dividend of the 2009/10 financial year.
Conclusion and outlook
- Good sales resilience, confirming the strength of Pernod Ricard’s portfolio and commercial network
- The rapid and accretive integration of Vin&Sprit and Absolut Vodka
- An outstanding increase in profit margins and results, while maintaining strong advertising and promotion investment in strategic brand/market combinations
- Rapid and significant debt reduction
For 2009/10, Pernod Ricard anticipates a general economic environment that will remain difficult and an overall stagnation of the Wines & Spirits industry, with contrasting situations depending on countries and categories. The comparison basis of the first half-year, and in particular that of the first quarter will be unfavourable, due to the very strong performance reported over the first half of the 2008/09 financial year.
Pierre Pringuet, Chief Executive Officer of the Group, stated: “Despite a particularly difficult environment, the Group achieved a very satisfactory performance in the year just ended: this reflects the effectiveness and strength of our strategy, and also the commitment and responsiveness of our teams around the world. We start 2009/10 with confidence and determination: our priorities are clear, continue to reduce debt and strengthen investments behind our strategic brands.”
As in the past, Pernod Ricard will communicate its results guidance for the current year at the Annual General Meeting, which will be held on 2 November next.”
(1) According to the Syndicated Credit method
(2) Organic growth
Shareholders’ agenda: 1st quarter 2009/10 sales – Thursday 22 October 2009
About Pernod Ricard
Pernod Ricard is the world’s n°2 in wines and spirits with consolidated Sales of € 8,558 million in 2014/15. Created in 1975 by the merger of Ricard and Pernod, the Group has undergone sustained development, based on both organic growth and acquisitions: Seagram (2001), Allied Domecq (2005) and Vin&Sprit (2008). Pernod Ricard holds one of the most prestigious brand portfolios in the sector: Absolut Vodka, Ricard pastis, Ballantine’s, Chivas Regal, Royal Salute and The Glenlivet Scotch whiskies, Jameson Irish whiskey, Martell cognac, Havana Club rum, Beefeater gin, Kahlúa and Malibu liqueurs, Mumm and Perrier- Jouët champagnes, as well Jacob’s Creek, Brancott Estate, Campo Viejo, Graffigna and Kenwood wines. Pernod Ricard employs a workforce of approximately 18,000 people and operates through a decentralised organisation, with 6 “Brand Companies” and 80 “Market Companies” established in each key market. Pernod Ricard is strongly committed to a sustainable development policy and encourages responsible consumption. Pernod Ricard’s strategy and ambition are based on 3 key values that guide its expansion: entrepreneurial spirit, mutual trust and a strong sense of ethics. Pernod Ricard is listed on Euronext (Ticker: RI; ISIN code: FR0000120693) and is part of the CAC 40 index.
Contacts Pernod Ricard
Julia MASSIES / Financial Communication – Investor Relations VP
Tel: +33 (0)1 41 00 41 71
Sylvie MACHENAUD / Director External Communications
Tel: +33 (0)1 41 00 42 74
Emmanuel VOUIN / Press Relations Manager
Tel: +33 (0)1 41 00 44 04
Apolline CELEYRON / Press Relations Officer
Tel: +33 (0)1 41 00 40 97