Pernod Ricard reports its best growth since 2007/0808/30/2012
Pernod Ricard reports its best growth since 2007/08
- accelerated sales growth to +8%(1)
- growth(1) in profit from recurring operations of +9% compared to a target of “close to +8%(1)”
- significant improvement in operating margin rate (+75 bps)
- completion of debt refinancing and accelerated debt reduction with a net debt to EBITDA ratio(2) of 3.8 at 30 June 2012 compared to a guidance of “close to 3.9”
- proposed dividend of €1.58 per share, an increase of +10%
Conformément à sa pratique, Pernod Ricard communiquera ses objectifs de résultats pour l’exercice en cours lors de la communication du chiffre d’affaires de son 1er trimestre 2012/13 le 25 octobre 2012.
Le Conseil d’Administration de Pernod Ricard, réuni le 29 août 2012, a arrêté les comptes de l’exercice 2011/12, clos au 30 juin 2012.
Best growth since 2007/08
- Sales: € 8,215 million (+8%(1), reported growth of +7%)
- Top 14: +10%(1)
- Emerging markets: +17%(1) / Mature markets: +2%(1)
- Profit from recurring operations: € 2,114 million (+9%(1), reported growth of +11%)
- Group share of net profit from recurring operations: € 1,201 million (+10%)
- Operating margin (PRO / sales): 25.7%, an increase of +75 bps
- Net Debt / EBITDA ratio(2): 3.8 at 30 June 2012 vs. 4.4 at 30 June 2011
Sustained growth still driven by emerging markets, with confirmed growth in mature markets
Full-year sales totalled € 8,215 million (excl. tax and duties), a sustained growth of +7%, resulting from:
- an organic growth of +8%, due to (i) continued very strong growth in emerging markets (+17%(1)) and (ii) mature markets (+2%(1)), which grew for the second consecutive year,
- a favourable foreign exchange effect of € 51 million, for a +1% positive effect over the full financial year, which turned positive in the second half of the year, as it was negative by € (99) million at the end of the first half,
- a group structure effect of -1%, primarily due to the disposal of certain Spanish and New Zealand activities in 2010/11 and certain Canadian activities in 2011/12.
Consolidated sales for the 4th quarter 2011/12 increased +9% to € 1,901 million, resulting from:
- a +4% organic growth,
- a positive +6% foreign exchange effect,
- a negative -1% Group structure effect.
Excluding technical effects (French destocking), organic growth for the 4th quarter is +7%, in line with the underlying trends noted at the start of the financial year: +8%(1) in the first half of the year and in the 3rd quarter, excluding technical effects (French destocking and Chinese new year)
- Asia/Rest of World, with growth of +15%(1), remains the growth driver of the Group, primarily due to China, India, Vietnam, Taiwan and Travel Retail. Growth was also very strong in Africa/Middle East.
- Americas reported growth of +6%(1). In the US, growth accelerated to +5%(1) (vs. +2%(1) in 2010/11), driven by Jameson. The improved performance of Absolut in the 2nd half of the year should also be noted. Brazil’s sales grew +13%(1), driven by the Top 14 (+26%(1)), particularly due to the success of Absolut and Scotch whiskies. Due to the reorganisation of the subsidiary, Mexico posted a decline of -12%(1).
- Europe, excluding France recorded sales growth of +2%(1), with pronounced bipolarisation between East and West. In Eastern Europe, sales growth noticeably accelerated to +16%(1) (compared to +9%(1) in 2010/11), while sales in Western Europe declined -1%(1), a similar decrease as in the previous year (-2%(1)). This decline is primarily attributable to Spain (-4%(1)), Italy (-13%(1)), Greece (-13%(1)) and the UK (-4%(1)).
- In France, sales declined -1%(1) due to a decrease in spirits consumption following the excise duty hike of 1 January 2012 (+14% on average), which had a particularly adverse effect on the aniseed category. Despite this increase, certain brands posted a strong performance (Absolut +13%(1), Havana Club +13%(1)).
Sales by brand: all-time record for the Top 14 (60% of Group), with significant price/mix, driven by Martell and whiskies
Top 14 volumes grew +3% to an all-time record (47.2 million 9L-cases), as did eight of its constituent brands: Absolut (+3%), Chivas (+7%), Jameson (+15%), Malibu (+6%), Beefeater (+6%), Martell (+10%), The Glenlivet (+15%), and Royal Salute (+20%).
In value(1), a significant +6% price/mix effect enabled the Top 14 to grow +10%. Six of these brands reported double-digit growth(1): Martell (+25%), Royal Salute (+23%), TheGlenlivet (+19%), Jameson (+18%), Perrier Jouët (+14%) and Chivas (+11%). Only Ricard declined -3%(1) (the aniseed category in France was severely affected by the excise duty hike).
Priority premium wine volumes grew +2%. Campo Viejo and Graffigna continued to gain ground and Brancott Estate enjoyed renewed growth, offsetting the moderate decline of Jacob’s Creek. The “high-value” strategy implemented for these brands generated a +4%(1) increase in full-year sales, and, more significantly, double-digit growth in their contribution after advertising and promotion expenditure.
Value growth(1) of the 18 key local spirits brands accelerated overall to +8%. Local Indian whiskies remained just as buoyant (+26%(1)). Other brands also reported double-digit growth: Passport (+22%(1)) gained momentum, benefiting from the emergence of the middle class which it particularly addresses, as did ArArAt (+26%(1)), Olmeca (+20%(1)) and Something Special (+15%(1)). The year remained difficult for Imperial and 100 Pipers.
Premium brands(3) now account for 73% of Group sales, a two-percentage point increase compared to the previous year.
Gross margin (after logistics costs) was € 5,047 million, an increase of +8%(1), with a gross margin to sales ratio which substantially improved to 61.4%in 2011/12, compared to 60.3% in the previous year (+111 bps). This was the combined result of:
- a favourable mix effect relating to the increased weight of the Top 14 and superior qualities, particularly for Martell and Jameson,
- price increases (+3% on average for the Top 14),
- tight control of input costs (increase of +2% excluding mix effects),
- a favourable foreign exchange effect.
Increases in structure costs targeting emerging markets, innovation and talents
Structure costs increased +8%(1) to € 1,362 million, in line with sales growth. Resources are allocated based on market growth potential. Emerging markets received 63% of the increase(1), in particular to strengthen the distribution network in China (+31%(1)), India (+27%(1)) and Russia (+22%(1)). Two subsidiaries were created in Vietnam and Sub-Saharan Africa. At the same time, structure costs increased below inflation in Western Europe. In total, in the 2011/12 financial year the structure costs to sales ratio was 16.6%, including an increase in investments devoted to strategic projects, particularly innovation (Breakthrough Innovation Group) and talent management (Pernod Ricard University).
Profit from recurring operationsgrew +9%(1) to € 2,114 million, along with a significant increase in the operating margin (+75 bps), due to:
- premiumisation, which improved the gross margin,
- continued sustained advertising and promotion expenditure, focused on the most profitable brands (Top 14),
- targeted organisational reinforcement on sales forces of the most buoyant markets (BRICs in particular),
- a favourable forex impact.
With the exception of France (adversely affected by the excise duty hike), all regions contributed to organic growth in profit from recurring operations, due particularly to:
- continued very strong momentum in Asia,
- acceleration in the United States and Eastern Europe.
Net profit from recurring operations: double-digit growth
Financial income / (expense) from recurring operations was an expense of € (509) million, compared to € (469) million in the prior year. In 2011/12, Pernod Ricard delivered on all the objectives of its financing strategy (particularly debt refinancing), resulting in a controlled increase in the average cost of debt to 5.1% for the financial year, compared to 4.7% in 2010/11. This cost remains below the 5.3% target, and the new debt profile has numerous advantages:
- la part obligataire est accrue à plus de 80% ce qui constitue un bon équilibre entre financements bancaires et obligataires dans le contexte actuel, la part à taux fixe (incluant les « collars ») est accrue à plus de 90% pour sécuriser des taux long terme attractifs,
- la maturité est allongée à plus de 7 ans avec des échéances de remboursement repoussées et mieux étalées,
- le Groupe dispose d’une ligne non tirée de 1,5 milliard d’euros qui augmente sa flexibilité financière,
- la structuration de la dette par devise (USD : 57%) permet de maintenir la couverture de change naturelle avec une dette par devise adaptée au cash flow par devise.
Corporate income tax on items from recurring operations was a charge of € 377 million, being an effective tax rate of 23.5%, in line with the target specified in February 2012.
Overall, the Group share of net profit from recurring operations reached € 1,201 million, a +10% increase compared to the previous financial year, primarily driven by the operating performance.
Diluted net earnings per share from recurring operations also increased to € 4.53 (+10%, in line with the growth in the Group share of net profit from recurring operations).
Other operating income and expenses from non-recurring operations totalled a net expense of € (145) million, including restructuring costs of € (30) million and other non-recurring income and expenses of € (115) million. The latter primarily includes asset impairments and disputes & risks.
Non-recurring financial items were a net expense of € (39) million, mainly comprising foreign exchange losses.
Lastly, corporate income tax on non-recurring items was a net income of € 130 million, as a result of technical items, principally the update of deferred tax rates.
Therefore, the Group share of net profit reached € 1,146 million, a +10% increase for the second consecutive year.
Accelerated debt reduction
Net debt came to € 9,363 million at 30 June 2012. Before translation adjustment, in 2011/12 net debt decreased € 385 million, a similar reduction to that of the previous year, excluding acquisitions and disposals.
The Net Debt to EBITDA ratio(2) (average EUR/USD rate of 1.34) once again decreased significantly to 3.8 at 30 June 2012, compared to 4.4 at 30 June 2011. Having fallen below the threshold of 4.0, in 2012/13 this ratio will trigger a further 15 bps reduction in the spread of the syndicated credit.
Un dividende de 1,58 €/action au titre de l’exercice 2011/12 (en hausse de +10% par rapport à celui de l’exercice précédent) sera soumis au vote de l’Assemblée Générale du 9 novembre 2012. Ce dividende
correspond à la politique habituelle de distribution en numéraire d’environ 1/3 du résultat net courant (taux de distribution : 35%).
Compte tenu de l’acompte de 0,72 €/action versé le 5 juillet 2012, le solde à verser s’élève à 0,86 €/action.
Sous réserve de vote positif à l’Assemblée Générale, ce solde sera détaché le 14 novembre 2012 et mis en paiement le 19 novembre 2012.
Conclusion: best growth since 2007/08
- accelerating growth(1) both of sales and operating profit
- improving significantly its operating margin rate
- completing the refinancing of its debt and continuing its rapid debt reduction.
Pernod Ricard therefore delivered its best growth since 2007/08.
The 2012/13 macro-economic climate takes into account:
- a slowdown in the pace of global economic growth in mature as well as in emerging markets
- a situation remaining difficult in Western Europe (impact of debt and public deficit reduction measures)
- continued good growth in the US and strong growth in emerging markets
- the strength of its portfolio of premium brands, the quality of its distribution network and its leading positions in the most promising emerging markets
- its policy of significant investment behind key brands and markets, supported by a growing innovation flow, entering new markets and addressing new consumption occasions.
(1) Organic growth
(2) Net debt calculated by translating the non-euro denominated portion at average forex rates for the financial year
(3) Retail price > USD 17 for spirits and > USD 5 for wine
About Pernod RicardPernod Ricard is the world’s co-leader in wines and spirits with consolidated sales of € 8,575 million in 2012/13. 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 19 000 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 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
Sylvie MACHENAUD / Director External Communications
Tel: +33 (0)1 41 00 42 74
Alison DONOHOE / Investor Relations
Tel: +33 (0)1 41 00 42 14
Carina ALFONSO MARTIN / Press Relations Manager
Tel: +33 (0)1 41 00 43 42