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Earnings

Pernod Ricard sees opportunities as consumers turn to drinking at home

PARIS (Reuters) - Pernod Ricard PERP.PA looked to strong spirits sales in Europe and U.S. supermarkets as one bright spot during the coronavirus pandemic after reporting a 77 percent drop in net profit and a 1 billion euro write-down on Wednesday.

FILE PHOTO: Bottles of Ricard's aniseed-flavoured beverage are pictured at the Ricard manufacturing unit in Lormont, near Bordeaux, France February 15, 2019. REUTERS/Regis Duvignau/File Photo

The owner of Absolut vodka and Martell cognac did not give specific guidance for the year that started on July 1, aside from pointing to the resilient home consumption trends and also predicting sales in China would sequentially improve.

Duty free travel retail, which has been hit hard by restrictions on air travel, makes 6% of group sales, while Pernod has also been hobbled by lockdown restaurant closures.

Travel retail was expected to stay under pressure this year.

“For FY 2021 Pernod Ricard expects continued uncertainty and volatility, in particular relating to sanitary conditions and their impact on social gatherings, as well as challenging economic conditions,” Chairman and CEO Alexandre Ricard said.

Ricard said Pernod would invest more in the digital sector, and had identified opportunities thrown up by the pandemic and home alcohol consumption, including internet gatherings.

“New opportunities have arisen thanks to these digital, Zoom or Facebook virtual parties,” Ricard told a conference call on the group’s results.

ABSOLUT VODKA WRITE-OFF

Pernod Ricard also unexpectedly wrote off 1 billion euros ($1.2 billion) in the full financial year 2019/20 ended June 30 - largely linked to Absolut Vodka and its dependence on travel retail.

Pernod Ricard, the world's largest spirits maker after Diageo DGE.L, reported a 77% fall in net profit to 329 million euros in the full year and said profit from recurring operations fell 13.7% on an organic basis to 2.260 billion euros ($2.69 billion) in the year ended June 30.

This was better than the company’s July guidance for a 15% decline, helped by cost cuts and better-than-expected spirits sales to supermarkets in the United States and Europe. That helped cushion a weak performance in Asia and in travel retail.

Its shares rose 2.7% to 145.25 euros by 1221 GMT.

Over the twelve months to June 30, a sales fall of 9.5% to 8.448 billion euros, reflected notably a 27% fall in global travel retail sales and a 16% fall in China sales.

In China, which contributes 9% of group sales and is the group’s second largest market after the United States, trends were improving in the fourth quarter with the gradual reopening of bars and restaurants. Some 90% of bars and restaurants have now re-opened in China.

$1 = 0.8401 euros)

Reporting by Dominique Vidalon; Editing by Louise Heavens and Elaine Hardcastle

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