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Half-Year Results 2011/12


The Pernod Ricard Board of Directors’ meeting of 15 February 2012, chaired by Patrick Ricard, approved the financial statements for the half-year 2011/12 financial period ended 31 December 2011.

Press Release

Very strong performance

  • Sales: +11%(1)
  • Profit from recurring operations: +17%(1)
  • Group share of net profit: +20%

Upgraded guidance for full-year 2011/12

  • Organic growth in profit from recurring operations close to 8%
  • Net debt(2) / EBITDA(2) close to 3.9 at 30 June 2012

 In summary :


  • Strong sales dynamism (+11%(1)), driven by the Top 14 (+14%(1)) and emerging markets (+18%(1))
  • Improvement in margin rates (gross margin: 62.1%, +124bps) while maintaining a strong advertising and promotional support to our brands, particularly to the benefit of innovation
  • Accelerated growth of profits: +17%(1)
  • Further significant deleveraging and key progress on the road to refinancing



On this occasion, Pierre Pringuet, Chief Executive Officer of Pernod Ricard, declared that:

“We are very pleased with the excellent business and financial performance of Pernod Ricard in the half year 2011/12. It demonstrates the strength of our business model (vast portfolio of premium brands, wholly-owned global distribution network) as well as the pertinence of our choices (sustained brand investment, development in emerging markets): this constitutes a real competitive advantage in the current economic environment. Confident in the continuation of solid underlying trends we hence upgrade our full year 2011/12 guidance as follows: organic growth in profit from recurring operations close to +8% and a net debt/EBITDA ratio (2) close to 3.9 at 30 June 2012.”

Key figures

  • Sales: € 4,614 million (+8%, organic growth +11%), driven by the Top 14 (+14%(1)) and emerging markets (+18%(1))
  • Advertising & promotion expenditure: up 8%(1), representing a stable A&P to sales ratio
  • Profit from recurring operations: € 1,379 million (+14%, organic growth +17%)  
    • Group share of net profit from recurring operations: € 843 million (+16%)
    • Group share of net profit: € 800 million (+20%)
    • Continued strong deleveraging: Net Debt/EBITDA ratio(2) of 3.9 at 31 December 2011 vs. 4.4 at 30 June 2011

Activity Review

In the first half of its 2011/12 financial year, a period marked by divergent macroeconomic trends in its markets, Pernod Ricard posted continued strong growth with:
    • dynamic sales, driven by the Top 14 and emerging markets
    • improved margin rates while maintaining strong advertising and promotion support behind its brands
    • acceleration of organic growth in profit from recurring operations of +17% with growth(1) in every region of the Group
    • key steps in debt reduction and refinancing


Half-year sales totalled € 4,614 million (excl. tax and duties), a sustained growth of +8%, resulting from:
  • organic growth of +11%, with continued dynamic growth in emerging markets, up +18%(1), and solid growth in mature markets (+6%(1)). This growth was boosted somewhat by stock building by the trade in France (“French pre-buying”) prior to an excise tax increase on spirits (effective as of 1 January 2012). Adjusting for “French pre-buying, growth in mature markets was solid at +3%(1). At the Group level, organic growth in net sales, excluding “French prebuying” would have been +8%.
    • an unfavourable foreign exchange effect of € 99 million for a -2% negative effect over the half year, primarily from the depreciation of the US dollar and certain emerging market currencies (Indian rupee, Mexican peso...),
    • a negative group structure effect of -1%, primarily due to the disposal of certain activities in New Zealand in half-year 2010/11.

    Consolidated sales for the 2nd quarter 2011/12 increased +9% to € 2,627 million, resulting from +11% organic growth, a negative -1% foreign exchange effect and a negative -1% Group structure effect.


Growth in all regions in the half year:

  •  Asia/Rest of the World, with growth of +15% (organic growth of +18%), remained the driving force for Group growth, primarily due to Asia (particularly China, India, Vietnam, Taiwan, Duty Free markets) and Africa/Middle East. Martell, Scotch whiskies in the Top 14 and Indian whiskies once again led growth. Seeding categories such as wine, champagne and vodka are gaining in significance.
  • Americas reported growth of +1% (organic growth of +6%). Net sales in the US (+5%(1)) showed favourable price-mix. Jameson in the US (+37%(1)) remains the leading growth driver, but other brands also posted solid growth (The Glenlivet, Malibu...). Absolut was stable in the US. Sales also grew in most other markets of the region, except Mexico (implementation of a new business model). Brazil’s sales grew +14%(1), driven by the Top 14 (+34%(1)), particularly due to the success of Absolut, Chivas and Ballantine’s. Canada logged accelerated growth (+5%(1)) with double-digit growth from Kahlua and Malibu.
    • In Europe excluding France, the half year was satisfying, with net sales +2%(1) compared to stability(1) over the full financial year 2010/11. The trends were divergent, with accelerated growth in Eastern and Central Europe (+15%(1)) and a moderate decline in Western Europe (-2%(1)) due primarily to Spain (-5%(1), no market recovery as of yet), UK (-6%(1), due to wine) and Italy (-11%(1) , tight control of stocks by the trade). Other markets in Western Europe were resilient (Germany +2%(1), Duty Free).
    • In France, sales grew an exceptional +25%(1) due to trade pre-buying (3-4 months of stocks) prior to the excise duty increase on spirits (+14% on average). The impact on net sales is estimated at € 98 million. Excluding the estimated “pre-buying” impact, net sales grew +1%(1), The Top 14 brands (+26%(1)), in particular Ricard, Ballantine’s, and Jameson, benefitted from the trade “pre-buying.”




In the half year the Top 14 brands (61% of group sales) grew +9% in volume and +14% in value(1) with seven of the brands reporting double-digit growth(1):

 Royal Salute (+34%), Ricard (+32%, benefitting from the “France pre-buying”), Martell (+28%), Jameson (+25%), Perrier Jouët (+22%), The Glenlivet (+19%), Chivas Regal (+13%). Absolut net sales grew +4%(1) with growth in all regions.
Havana Club net sales were stable(1) due mainly to deceleration in Spain and Italy. Kahlua slipped -3%(1) due to shipments being down in the US.
However, depletions in this market are stabilizing, and other markets posted strong growth (Canada +14%(1); Russia +42%(1)).
    • The priority premium wine brands grew +3%(1). The high value strategy and country diversification of these brands generated a +10%(1) increase in their contribution after advertising and promotion during the half year, a marked acceleration over the +6%(1) published for the full-year 2010/11.
    • The 18 key local spirits brands contributed 19% of the Group’s organic net sales growth. The brands increased +12% in value(1), driven by local whiskies in India (+26%(1)). Several other brands logged double-digit growth(1), including Clan Cambell (+32%(1)) and Pastis 51 (+33%(1)), which benefitted from trade pre-buying in France. Excluding the trade pre-buying impact, organic growth in net sales of the 18 key local spirits brands was +8%(1).
    • Premium brands(3) represented 74% of Group sales in the half-year 2011/12, compared to 71% for the half-year 2010/11.


Gross margin and advertising and promotion expenditure

Gross margin (after logistics costs) rose to € 2,863 million, an increase of +12%(1), with a gross margin to sales ratio which substantially improved to 62.1%, compared to 60.8% for the previous half year (+124 bps; approximately +90 bps adjusted for “French pre-buying”). This was the result of a favourable mix effect relating to the percentage rise in total sales of the Top 14 brands and superior qualities particularly on Chivas, Martell, Ballantine’s and, price increases (>+2% on average for the Top 14) and good control of COGS (<+2% on average).
Advertising and promotion expenditure increased +8%(1) to € 817 million. The advertising and promotion expenditure to sales ratio equalled 17.7%, which is stable when adjusted for the French pre-buying impact. Approximately 3/4 of the investment was concentrated on the Top 14. Advertising and promotion expenditure in emerging markets rose +20%(1) in the period.


Structure costs

Structure costs increased +8%(1) to € 667 million. Resources have been allocated based on potential for market growth. The distribution network has therefore been substantially reinforced in emerging markets:
China (+25%(1)), India (+31%(1)), Russia (+18%(1)), Brazil (+18%(1)). In Western Europe structure costs grew in line with inflation +2%(1). In total, the structure costs to sales ratio was 14.5%, a decrease of 22 bps.


Profit from recurring operations

Profit from recurring operations grew +17%(1) to € 1,379 million. Excluding the French pre-buying impact, profit from recurring operations grew +12%(1). The operating margin reached 29.9%, a strong rise compared to the half-year 2010/11 (28.3%), or 29.1% adjusted for French pre-buying.

Over the half-year 2011/12, the foreign exchange effect on profit from recurring operations was a negative € 34 million, mainly due to the US dollar and certain emerging market currencies. Based on current rates, for the full-year 2011/12 the foreign exchange impact on profit from recurring operations should turn positive to approximately € 25 million.
In half-year 2011/12 the negative € 6 million group structure effect profit from recurring operations is related to the disposal of certain activities in New Zealand in half-year 2010/11. For full-year 2011/12 the impact of Group structure on profit from recurring operations is estimated at negative € (15) million.

All regions contributed to organic growth in profit from recurring operations, including +27%(1) in Asia/Rest of the World, +6%(1) in the Americas, +5%(1) in Europe excluding France and +47%(1) in France.



Net profit from recurring operations

Net financial expenses from recurring operations totalled € 233 million, a € 10 million improvement compared to half year 2010/11. Net financial expenses were composed of debt related financial expenses of € 228 million (savings of € 4 million, relating to debt reduction) and other net financial expenses from recurring operations of € 5 million (savings of € 6 million due to net financial expenses relating to pension benefits).

The average cost of the debt came to 4.9%, a moderate increase compared to the 4.7% for the full year 2010/11, following the Group’s accelerated refinancing. Based on current interest rates, the full year 2011/12 target of the average cost of borrowing is estimated at close to 5.3%.
Corporate income tax on items from recurring operations was a charge of € 283 million, an effective tax rate on items from recurring operations of 24.7%, compared to 23.1% in HY1 2010/11, with a significant impact from season activity reinforced by “French pre-buying.” The effective corporate tax rate for the full financial-year 2011/12 is estimated in a range of 23%-24%.

Overall, the Group share of net profit from recurring operations reached € 843 million, an increase of +16% compared to the half-year 2010/11; diluted net earnings per share from recurring operations also increased +16% to € 3.19 per share.



Net debt at 31 December 2011 was € 9,410 million. Net debt before translation adjustment decreased € 192 million thanks to strong free cash flow of € 607 million. The translation adjustment (EUR/USD rate of 1.29 at 31 December 2011 vs. 1.45 at 30 June 2011) negatively impacted reported net debt by € 564 million.

The Net Debt to EBITDA ratio(2) decreased significantly to 3.9 at 31 December 2011, compared to 4.4 at 30 June 2011. Adjusted for the “French pre-buying,” the net debt to EBITDA ratio(2) would be 4.1.

After its upgrade to Investment Grade by Moody’s and S&P in the half-year 2011/12, Pernod Ricard accelerated its refinancing with two bond issuances at attractive conditions:   
  • USD 1.5 billion in October 2011 (10-year maturity, 4.45%)
  • USD 2.5 billion in January 2012, post half-year 2011/12 (5-year maturity, 2.95%; 10.5- year maturity, 4.25%; 30-year maturity, 5.5%)

As a result, at 31 December 2011, on a pro forma basis for the bond issuance of January 2012:

  • bond debt represented 77% of gross debt, ahead of the initial target of 50%
  • the weighted maturity of the debt was extended to 6 years and 10 months, with a more even future repayment profile
  • drawn syndicated bank debt to be financed before July 2013 is limited to € 1.5 billion 


Conclusion and outlook

Pernod Ricard had an excellent half-year 2011/12, with:

  • continuity of main business trends of full-year 2010/11: strong growth in emerging markets, premiumisation...
  • significant operating margin improvement
  • further deleveraging and decisive progress to refinance the July 2013 maturity
  • some favourable technical effects (“French pre-buying,” earlier Chinese New Year) that will reverse in the second half-year 2011/12


Pernod Ricard’s economic scenario for the next six months:

  • continued strong dynamism for emerging markets: Asia, Eastern Europe, Latin America, Africa
  • gradual improvement in the US


  • ongoing softness in Western Europe, with continued recession in Southern Europe
  • depressed consumption expected in France due to retail price increases as early as January 2012

About Pernod Ricard

Pernod Ricard is the world’s co-leader in wines and spirits with consolidated sales of € 7,643 million in 2010/11. 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 (formerly Montana), Campo Viejo and Graffigna wines. Pernod Ricard employs a workforce of nearly 18,000 people and operates through a decentralised organisation, with 6 “Brand Companies” and 70 “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 the NYSE Euronext exchange (Ticker: RI; ISIN code: FR0000120693) and is a member of the CAC 40 index.

Contacts Pernod Ricard

    Jean TOUBOUL / Financial Communication – Investor Relations VP
    Tel: +33 (0)1 41 00 41 71

    Stéphanie SCHROEDER / External Communications Deputy Director
    Tel: +33 (0)1 41 00 42 74

    Alison DONOHOE / Investor Relations
    Tel: +33 (0)1 41 00 42 14

    Florence TARON / Press Relations Manager
    Tel: +33 (0)1 41 00 40 88

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