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Pernod boss targets growth as China, U.S. weigh on First half
February 12, 2015 / 7:12 AM / 3 years ago

Pernod boss targets growth as China, U.S. weigh on First half

PARIS (Reuters) - French spirits group Pernod Ricard (PERP.PA) is pinning its hopes on the coming new year celebrations in China, its second-largest market, to deliver gradually improving sales this financial year and sustain profit growth.

The world’s second-largest spirits group behind Britain’s Diageo PLC (DGE.L) said on Thursday first-half operating profit stagnated, held back by a late timing of the Chinese New Year and a struggling vodka market in the United States, its top market.

The owner of Absolut vodka, Martell cognac and Jameson whiskey said it still eyed a rise of between 1 percent and 3 percent in underlying operating profit for the year ending June 30, 2015.

“My absolute priority is growth and growth in our two key markets, the U.S. and China,” new Chairman and CEO Alexandre Ricard told Reuters in a telephone interview.

Ricard became head of Pernod Ricard at a board meeting on Wednesday, putting the founding family back in charge at a time when growth in China and the U.S. has slowed.

In China, where the economy is decelerating and a government clampdown on extravagant spending has hurt premium spirits demand, sales fell 16 percent in the first-half year-on-year.

But the group said underlying trends were improving in China, which accounts for 12 percent of sales. The outlook largely hinges on premium cognac and whisky demand during the Chinese New Year celebrations starting Feb. 19.

“The Chinese New Year will be the true judge,” Ricard said, expecting a clearer picture by end-March.

In the United States, the world’s biggest spirits market, Absolut vodka, the group’s largest brand, is struggling, as trendy drinkers turn to brown spirits like bourbon and niche vodka brands like Texas-based Tito’s Handmade Vodka.

Sales fell 2 percent in the first-half in the U.S., as a 5-6 percent decline in vodka sales offset robust growth for Jameson whiskey and Martell cognac.

    Overall first-half sales reached 4.621 billion euros ($5.23 billion), an underlying rise of 1 percent, helped by still robust sales momentum in India, Brazil and travel retail. Underlying operating profit was flat at 1.358 billion euros.

    This was broadly in line with analysts’ expectations of 4.658 billion euros in sales and 1.382 billion in operating profit in a company-compiled consensus.

    At 1007 GMT (05:07 a.m. EST) Pernod shares, which have outperformed their sector .SX3P so far this year with a 16 percent gain and set an all-time of 108.75 euros last month, were down 2.4 percent.

    “Not great but not disastrous,” said RBC Capital Markets analysts, who have a “sector perform” rating.

    Pernod Ricard relies on Asia for about 38 percent of its sales and 43 percent of its operating profit.

    Reporting by Dominique Vidalon; Editing by Andrew Callus and Vincent Baby

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