Chivas Brothers parent group Pernod Ricard has stuck to its forecast of higher annual profits, although a jump in whisky sales failed to lift its earnings during the first half of the year.
The world’s second-largest spirits maker and owner of brands including Absolut vodka and Beefeater gin saw sales in China slide 16 per cent because of the slowing economy and a crackdown on lavish spending among officials. The decline seen in the firm’s second-biggest market echoed that reported by larger rival Diageo last month when it posted an 18 per cent slide in first-half operating profits.
However, Pernod said there were signs of a “gradual improvement” in underlying sales trends across China, where annual comparisons have also been hit by the later timing of the Chinese New Year, which begins on 19 February. Last year’s festivities kicked off on 31 January.
Overall profits were flat at €1.4 billion (£1.04bn), and the Paris-headquartered group maintained its guidance for annual earnings growth of 1-3 per cent. Yesterday’s results were described as “solid” by new chief executive Alexandre Ricard, who succeeded long-standing boss Pierre Pringuet on Wednesday.
The grandson of company founder Paul Ricard and nephew of former chief executive Patrick Ricard said: “Our sales are gradually improving despite an environment that remains challenging.
“I am confident in the strength of our portfolio of premium brands and of our global network that support our three strategic growth pillars – premiumisation, expansion and innovation.”
Net sales at Pernod Ricard edged up 1 per cent to €4.6bn in the six months to 31 December, driven by strong growth among its stable of whisky and Champagne brands.
In volume terms, Mumm Champagne was the clear leader, rising 14 per cent, followed by The Glenlivet single malt whisky with an 11 per cent jump. Jameson Irish whiskey grew 8 per cent, while Ballantine’s Scotch was up 6 per cent.
Sales in the UK rose by 7 per cent, with Absolut growing its market share but Jacob’s Creek wine suffered amid a “very competitive” trading environment.
Shore Capital analyst Phil Carroll said: “Overall, we believe Pernod has delivered a reasonably solid performance in the first half against challenging market conditions. There are signs of improving trends in some markets but we believe we are still some way off from seeing decent upgrade potential aside from that which is foreign exchange related.”
Pringuet, who served as chief executive for 15 years, will remain with the drinks maker as vice-chairman and Ricard paid tribute to his “crucial contribution” to its growth.
He added: “Together with Patrick Ricard, he made our leadership ambition a reality. I fully embrace this goal. Our decentralised organisation and premiumisation strategy will remain the assets of our model. Excellence in execution in every market will be key to win the battle of top-line growth.”
In December, Pringuet was appointed as chairman of the Scotch Whisky Association, taking over the helm from Ian Curle, chief executive of Famous Grouse and Highland Park owner Edrington. One of his first moves after taking up the role was to urge George Osborne to cut excise duty on spirits by 2p in next month’s Budget.
When asked if such a cut was likely from the Chancellor in a period of continued austerity measures in the UK, he said: “Ninety per cent of Scotch whisky is exported. We have to take a global view.”
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