2008/2009 Half-Year Sales02/13/2009
Very good 2008/09 1st half-year
Confirmed guidance of double-digit growth in Group net profit from recurring operations, which should exceed € 1 billion for the first time over the full 2008/09 financial year
-> Sales: € 4,212 million (+13%)
-> Profit from recurring operations: € 1,196 million (+24%)
-> Group net profit from recurring operations: € 685 million (+15%)
-> Group net profit: € 615 million (+5%)
Pernod Ricard achieved an excellent performance during the 2008/09 1st half-year (1 July to 31 December 2008):
- Very significant increase in operating margin (profit from recurring operations/sales) that rose by 240 bps to 28.4%
- Substantial 15% increase in Group net profit from recurring operations reflecting the above two factors as well as the success of the integration of Absolut, which contributed immediately and significantly to the Group’s growth.
● strong 5% organic growth, in spite of a more difficult environment in the second quarter.
● a 4% negative foreign exchange effect, primarily due to the depreciation of the Pound Sterling, Korean Won, Indian Rupee and Australian Dollar.
● a strong 12% group structure effect, primarily due to the integration of V&S from 23 July.
The 14 strategic brands (excluding Absolut), grew by 1% in volume and 6% in value(1), thereby reflecting the very positive impact of the move up-market and price increases. The strategic brands that reported the strongest value growth(1) were: Martell (+21%), Jameson (+14%), The Glenlivet (+12%), Havana Club (+11%) and Mumm (+8%). Chivas Regal (+6%) and Ballantine’s (+5%) proved they could perform well, whereas Malibu (+1%), Kahlùa (-7%) and Perrier Jouët (-8%) were adversely affected by market conditions and inventory reductions in the US.
Additional sales from the contribution of Vin & Sprit’s portfolio, totalled € 507 million for 5 months and 7 days. The Absolut brand continued its rapid development with a slight decline in the US, but continued strong growth in other markets: Spain, the UK, France, Germany, Poland, Italy, Brazil, Mexico, …
In the 2nd quarter 2008/09, consolidated sales increased by 14% to € 2,456 million, including 3% organic growth, a 2% negative foreign exchange effect and a 13% positive group structure effect. The fact that strong growth was maintained over this quarter demonstrates the strength and staying power of Pernod Ricard’s portfolio and commercial network. The sharply negative 6% foreign exchange effect of the first quarter was significantly offset by the appreciation of the US dollar and the Chinese Yuan.
Significantly improved portfolio contributive margin
In total, the contribution after advertising and promotional expenditure increased by 18% to € 1,772 million and represented 42.1% of sales, up 160 bps compared to the previous financial year.
Improved structure costs / sales ratio
Remarkable growth in profit from recurring operations
All regions experienced double-digit growth in profit from recurring operations:
- Remarkable 23% growth in Asia/Rest of World (organic growth of 18%), which was due in particular to vigorous Martell and Ballantine’s sales in China and local brands in India.
- The foreign exchange and group structure effects particularly enhanced the growth of the Americas region, which achieved a spectacular 46% increase. Sales were in slight decline in the US (-2%(1)), in a more difficult market, adversely affected by inventory reductions by retailers, whereas Latin America had a very good first half-year and the Canadian market grew.
- In Europe, organic growth was generated by Eastern Europe (Russia, Poland, Romania…) with good progress in Germany and Sweden, along with more difficult situations in Spain, the UK and Italy.
- In France, growth from Ballantine’s, Mumm and Clan Campbell’s commercial performance was accelerated by good control of structure costs and foreign exchange movements, especially the depreciation of the Pound Sterling.
Currency movements had a negative impact on sales but positive impact on profitability, primarily due to the depreciation of the currencies of two of our main producing countries: Pound Sterling and Australian Dollar. Over the 2008/09 first half-year, the foreign exchange effect on profit from recurring operations was positive at € 29 million.
Over 5 months and 7 days, Vin & Sprit’s integration added € 164 million to the profit from recurring operations of the first half-year 2008/09, thus strongly contributing to the growth of the Group.
Net profit from recurring operations
Corporate tax on recurring operations was an expense of € 169 million, i.e. a rate of 19.7%, in line with our forecasts.
In total, Group share of net profit from recurring operations totalled € 685 million, a 15% increase compared to the first half-year 2007/08.
Consequently, Group net profit totalled € 615 million, a 5% increase compared to the 2007/08 financial year.
Net debt and cost of debt
● the acquisition of Vin & Sprit and the exit from the Maxxium and Future Brands distribution contracts.
● the impact of the appreciation of the US dollar (€/$ = 1.39 at 31 December 2008, compared to 1.58 at 30 June 2008).
● strong free cash flow generation over the period (€ 658 million, free cash flow from recurring operations), bolstered by the setting up of a factoring facility.
● the payment of dividends relating to the 2007/08 financial year.
This strong cash generation and the € 1 billion asset disposal program will enable the Group to continue the rapid improvement of its debt ratios, that started in the first half 2008/09. The target of a net debt/EBITDA ratio of close to 4 by 30 June 2011 is therefore confirmed.
The average cost of debt should be less than 5% for the full year 2008/09 and close to 4% for 2009/10, base on current interest rates and current hedging.
Conclusion and outlook
Although visibility is limited for the second half of the year, we anticipate that the wines & spirits sector will on the whole continue to show excellent resilience. Our leadership positions should, thanks to the combined strength of our distribution network and our strong brands, enable us to gain market share in many countries, as we did during the first half-year. Third quarter growth (the weakest quarter of the year) will, however, be affected by unfavourable technical effects, which could result in negative organic growth in sales.
- Strong organic growth in profit from recurring operations (but due to the lack of visibility, we broaden our guidance range to between +5% and +8%)
- Average cost of borrowing below 5%
- Successful integration of Absolut and accelerated implementation of Vin & Sprit integration synergies
Pierre Pringuet, Chief Executive Officer states: “These factors enable us to confirm our guidance(4) for double-digit growth in our Group net profit from recurring operations, which for the first time should exceed € 1 billion over the full 2008/09 financial year”.
(1) Organic growth
(2) GNP/capita below USD 10,000
(3) Pernod Ricard’s original group structure
(4) At current foreign exchange and interest rates
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