A sign for Pernod Ricard’s Chivas Regal whisky in a suburb of Caracas, Venezuela. Picture: BLOOMBERG
A sign for Pernod Ricard’s Chivas Regal whisky in a suburb of Caracas, Venezuela. Picture: BLOOMBERG

Paris —French spirits maker Pernod Ricard has predicted lower than expected profit growth in this financial year, briefly knocking its shares to a four-month low.

The group, whose brands include Absolut vodka and Jameson whiskey as well as the aniseed liqueur from which it draws its name, saw underlying profit growth from recurring operations of 5% -7% for the year ending June 30 2019, below consensus expectations of 7.4%.

Its shares fell as low as €135, their lowest since April, before recovering to be down 0.3% at €137.95 in early morning trade on Wednesday.

Pernod, the world’s second-biggest spirits group behind Britain’s Diageo, said that it faced geopolitical and monetary uncertainties as well as pressure from higher costs of commodities such as agave for tequila and grapes for cognac.

For the year ended June 30 2018 profit rose to €2.36bn after strong demand in China and India as well as robust sales in the US, its top market.

The outcome was in line with an average forecast of €2.36bn in an Inquiry Financial poll for ThomsonReuters.

Analysts at Jefferies noted the projection was slightly weaker than had been expected.

"Despite the robust results, we expect a muted share reaction," they said in a note, keeping a "hold" rating on the stock.

Pernod, however, predicted a very strong first quarter, saying it would benefit from a low comparison base in India where it has faced setbacks including a ban on liquor outlets.

China festival

It also forecast a boost in the July-September period from an earlier Mid-Autumn Festival in China, where it banks on a thirst for premium drinks from a fast-rising middle class.

Sales growth for the 2017/ 2018 full year accelerated to 6% from 3.6% the previous year, spurred by a 17% jump in China, 14% in India and 4% in the US.

However, the recovery of the Absolut vodka brand in the US, which accounts for 20% of the US business, was taking longer than expected, with sales still down by about 3%-4% in value.

Net debt fell by €889m to €6.96bn and CEO Alexandre Ricard told a news conference that although Pernod Ricard had the means to do a large acquisition, it did not want to overpay and remained focused on just doing smaller bolt-on deals.

Reuters