Pernod Ricard posts stronger sales in quarter one on Chinese demand
Paris — Pernod Ricard posted a stronger than expected jump in first-quarter underlying sales, helped by accelerating Chinese demand for its high-margin Martell cognac and its Chivas whisky.
Demand remained robust in the French group’s main US market, where sales of Jameson Irish whiskey continued to grow at a double-digit rate, while travel retail sales gathered pace, lifting its shares to record highs.
Though the owner of Mumm champagne and Absolut vodka said some markets remained challenging, the company reiterated its forecast for a 3% to 5% rise in full-year profit from recurring operations after last year’s 3.3% growth.
Pernod, the world’s second-biggest spirits group behind Britain’s Diageo, reported like-for-like sales up 5.7% to ¤2.29bn ($2.71bn) for the three months to September 30, compared with analyst expectations of 3.4% growth.
Shares in the company rose 3.1% to ¤126 by 10.57am GMT, the leading gainer on the CAC 40 index of French blue chips, having touched a record high of ¤126.10.
"First quarter 2018 sales beat expectations, good start to the fiscal year," Liberum analysts wrote.
In other markets, Pernod said disruption from a ban on alcohol sales near highways in India, its second largest market, continued to weigh on sales but that this is now easing off. Sales in India rose 2% in the quarter, having previously slowed to 1% growth in its past financial year from 12% in 2015-16.
In China, sales of cognac and other luxury goods fell across the board after a government crackdown on corruption in 2014, hurting all spirits makers.
However, demand in China, which accounts for 9% of group sales, has been rebounding for several quarters and Pernod Ricard delivered growth of 2% there last year. This leapt to 15% in the first quarter, led by demand for Martell cognac, but also for brands such as Ballantine’s whisky and Absolut vodka.
Chivas whisky ended five years of declining sales in China after promotional investment and the launch of Chivas Extra 12, a brand dedicated to the Chinese market, though it cautioned that a later Chinese New Year in 2018 would hit second-quarter returns.
CEO Alexandre Ricard told Reuters it would be premature to extrapolate the strong first-quarter performance in China to the full year, but expressed confidence that it would exceed last year’s 2% growth.
Finance chief Gilles Bogaert told analysts: "We have [ aimed] for high, single-digit sales growth in China mid-term. This quarter shows we are getting there."
In the US, sales were up 4%, driven by double-digit growth for Jameson whiskey, though Absolut vodka remained in decline in a competitive environment.
France, which accounts for about 8% of group sales, remained a weak spot, with sales falling by 4%. Bogaert said the company could face a tough year in its home market as it contends with a deflationary environment that has affected all consumer goods companies in France.