ANALYSTS warned that French drinks giant Pernod Ricard may be over-optimistic about the recovery in China after Scotland’s second-biggest distiller yesterday unveiled a slowdown in emerging market sales.
Paris-listed Pernod, which owns Paisley-based Chivas Brothers, posted a 1 per cent dip in first-quarter sales to €2 billion (£1.7bn), with some of its whisky brands suffering the biggest falls as they came up against tough comparisons with the start of the previous financial year.
Sales of luxury brand Royal Salute were down 21 per cent year-on-year, while Ballantine’s was 11 per cent lower and Chivas Regal fell by 9 per cent.
The Glenlivet, Pernod’s flagship single malt label, decreased by 1 per cent, with only Absolut vodka, Beefeater gin and Havana Club rum making into positive territory out of its “top 14” brands.
Pierre Pringuet, chief executive at Pernod, said: “Our first quarter was adversely affected by the slowdown of emerging markets. However, we remain confident in the diversity of our portfolio and the strength of our distribution network.
“We anticipate organic growth in full-year profit from recurring operations between 4 per cent and 5 per cent.”
Analysts had pencilled in sales growth of about 2 per cent for Pernod’s first quarter, but noted that a 6 per cent fall in Asia meant the firm missed forecasts.
Eddy Hargreaves, an analyst at Canaccord Genuity, said: “We have been vociferous in highlighting the risks to consensus expectations for Asia, and especially China, at Pernod. The management was slow to acknowledge issues in China, which started in the second half of calendar 2012, and is now at risk of anticipating recovery too early.”
Hargreaves added: “While the Chinese risk is more widely recognised now, we still think risk is to the downside here over the next 12 months.
“This could now outweigh the longer-term attraction of the company’s exposure to Asian growth in investors’ minds.”
Investec Securities analyst Martin Deboo noted: “We read the first quarter as a material miss to expectations and consistent with our bearish thesis on the spirits sector.
“While the sales comparison gets a lot easier in the second quarter – and tough China comparisons get lapped in the second half – we see Pernod as having a constrained top line outlook for 2014 by historic standards.”
Last week, arch-rival Diageo – Scotland’s largest distiller and the maker of brands including Bell’s, Johnnie Walker and Talisker – posted a 1.1 per cent fall in sales in western Europe in the three months to 30 September.
But 5.1 per cent growth in North America helped global sales to rise by 3.1 per cent. Sales in the Caribbean and Latin America jumped by 10.9 per cent, but Asia-Pacific only managed 0.6 per cent growth.
Diageo highlighted 5 per cent sales growth in Africa, while SABMiller – which brews a range of beers from global brands such as Grolsch and Miller Genuine Draft through to more local labels like Dorada and Tropical – enjoyed an 11 per cent rise on the continent.