FY23 Full-year Sales and Results

FY23 Net Sales grew +10% organically, totalling €12,137m. Reported Sales growth was +13% with favourable foreign exchange impact mostly from USD appreciation versus EUR.
Broad-based growth across all regions with strong pricing execution:

• Americas: +2%, dynamic growth in LATAM led by Mexico and low-single digit growth in North America with stable Net Sales in USA and underlying value depletions +2%. Declining Sales expected in Q1 in USA, on high comparison basis, with positive outlook for the full year
• Asia-RoW: +17%, excellent broad-based growth led by India, Travel Retail recovery, China and Turkey. Solid performance in Japan, South Korea and dynamic rebound in Southeast Asia. Challenging macroeconomic environment in China leading to declining Net Sales in Q1 FY24, with high comparison basis expected to ease from Q2
• Europe: +8%, strong resilience and pricing with growth led by Spain, Germany and rebound in Travel Retail.

All spirits categories delivered strong growth:

• Strategic International Brands: +11%, strong momentum led by Scotch, Martell, Jameson and Absolut
• Strategic Local Brands: +10%, very dynamic growth notably led by Seagram’s Indian whiskies and Olmeca
• Specialty Brands: +8%, continued development led by Lillet, Aberlour, Malfy and the Spot Range
• Strategic Wines: (2)%, overall soft performance mainly driven by Jacob’s Creek and Campo Viejo in UK and North America.

Strong Price/mix at +9%, mostly from strong pricing actions (+8%). Resilient volumes growing +1%. Q4 Net Sales were €2,630m, with +19% organic growth.

Results

FY23 PRO grew +11% to €3,348m (+11% reported), sustaining organic Gross Margin and expanding organic Operating Margin thanks to leading premium portfolio, excellent Revenue Growth Management and operational efficiencies:

• Gross margin protected +3bps as price and mix offset COGS inflation
• A&P ratio maintained at c. 16% of Net Sales, with dynamic allocation between brands, markets and activities
• Discipline on Structure costs +37bps and growing +8% organically
• Negative FX impact on PRO of €(70)m with favorable impact from USD more than offset by Turkish Lira and other emerging market currencies

Recurring effective tax rate at 22.6%.
Group share of Net PRO was €2,340m, +10% reported vs. FY22.
Group share of Net Profit was €2,262m, +13% reported, a strong increase thanks to Profit from Recurring Operations growth.

Cash flow and debt

FY23 Recurring Free Cash Flow reached €1,653m as we leveraged our strong cash generation to accelerate investments in future organic growth with CAPEX and strategic inventories.
The cost of debt averaged 2.6% in FY23 due to higher financing rates.
Net debt increased to €10,273m with significant M&A activity (notably Sovereign Brands, Código and Skrewball), dividend cash out, c. €750m of share buyback executed and positive FX impact on Net Debt (USD/EUR).
Net Debt/EBITDA ratio at average FX rates2 stood at 2.7x as of 30 June 2023.
Return to shareholders is accelerating with a proposed dividend of €4.70, an increase of +14% vs. FY22, and a share buyback program of €500m to €800m in FY24.
The financial policy is as follows:

While maintaining investment grade rating;

• Investing in future organic growth, in particular through Strategic Inventories and Capital Expenditure
• Continued active portfolio management, including value creating M&A
• Dividend distribution at c.50% of Net Profit from Recurring Operations, aiming consistently at growing dividends
• Share buyback

Outlook

Building on our very strong FY23 performance, we confidently reiterate our FY23 to FY25 mid-term financial framework of aiming for the upper end of +4% to +7% Net Sales growth and +50/+60bps operating margin.
In a challenging environment, we anticipate for FY24:

• Broad-based and diversified Net Sales growth for the full year, with soft start in Q1 amplified by high comparison basis
• Adapting to easing inflationary pressures
• Continued focus on Revenue Growth Management and operational efficiencies
• Consistent A&P ratio at c. 16% of Net Sales, dynamically optimized through KDPs3
• Disciplined investments in structure
• All leading to organic Operating Margin expansion
• Significant investments in Capex c. €800m-€1bn range and strategic inventories with a similar level to FY23 to sustainably support future growth
• Share buyback of €500m to €800m in FY24
• Negative FX impact.

Alexandre Ricard, Chairman and Chief Executive Officer, stated,
“Pernod Ricard once again delivered a very strong full-year performance, achieving double-digit broad-based growth in sales and earnings despite a volatile environment. 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. Our transformational journey continues to accelerate through the deployment of tech and data-powered organizational, sales and marketing initiatives. 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.”

All growth data specified in this press release refers to organic growth (at constant FX and Group structure), unless otherwise stated. Data may be subject to rounding.
A detailed presentation of FY23 Sales and Results can be downloaded from our website: www.pernod-ricard.com
Audit procedures have been carried out on the financial statements. The Statutory Auditors’ report will be issued after examination of the management report and completion of procedures required for the filing of the Universal Registration Document.”

Definitions and reconciliation of non-IFRS measures to IFRS measures
Pernod Ricard’s management process is based on the following non-IFRS measures which are chosen for planning and reporting. The Group’s management believes these measures provide valuable additional information for users of the financial statements in understanding the Group’s performance. These non-IFRS measures should be considered as complementary to the comparable IFRS measures and reported movements therein.

Organic growth
- Organic growth is calculated after excluding the impacts of exchange rate movements, acquisitions and disposals and changes in applicable accounting principles.
- Exchange rates impact is calculated by translating the current year results at the prior year’s exchange rates.
- For acquisitions in the current year, the post-acquisition results are excluded from the organic movement calculations. For acquisitions in the prior year, post-acquisition results are included in the prior year but are included in the organic movement calculation from the anniversary of the acquisition date in the current year.
- Where a business, brand, brand distribution right or agency agreement was disposed of, or terminated, in the prior year, the Group, in the organic movement calculations, excludes the results for that business from the prior year. For disposals or terminations in the current year, the Group excludes the results for that business from the prior year from the date of the disposal or termination.
- The impact of hyperinflation on Net Sales and PRO in Turkey is excluded from P&L organic growth calculations by capping unit local price/cost increases to a maximum of +26% per year, equivalent to +100% over 3 years.
- This measure enables to focus on the performance of the business which is common to both years and which represents those measures that local managers are most directly able to influence.
Profit from Recurring Operations
Profit from Recurring Operations corresponds to the operating profit excluding other non-current operating income and expenses.