Pernod Ricard Reports Best Growth Since 2007/08
The company reported that sustained growth is still driven by emerging markets, with confirmed growth in mature markets. Full-year sales totalled € 8,215 million (excl. tax and duties), a sustained growth of +7%.
30 Aug 2012 --- In 2011/12, Pernod Ricard achieved its best growth since 2007/08, exceeding the financial targets that had been announced.
• accelerated sales growth to +8% growth in profit from recurring operations of +9% compared to a target of “close to +8%” significant improvement in operating margin rate (+75 bps) completion of debt refinancing and accelerated debt reduction with a net debt to EBITDA ratio(2) of 3.8 at 30 June 2012 compared to a guidance of “close to 3.9” proposed dividend of €1.58 per share, an increase of +10%
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Pierre Pringuet, Chief Executive Officer of the Group, commented: "Throughout the 2011/12 financial year, the Group recognised its best growth rates since the 2008 crisis, be it for the top or bottom line. This is the result of a clear and constant strategy: substantial investments in our brands, innovation, premiumisation and geographic expansion. This performance also derives from a unique, decentralised organisation founded upon the motivation and the accountability of men and women, that Patrick Ricard bestowed upon us." He also added : "Despite the economic uncertainty, we are confident in the Group’s ability to deliver solid growth this year as well."
In line with its standard practice, Pernod Ricard will communicate its earnings targets for the current financial year as part of its communication on 1st quarter 2012/13 sales on 25 October 2012.
The Pernod Ricard Board of Directors, meeting the 29 August 2012, approved the financial statements for the 2011/12 financial year ended 30 June 2012.
Best growth since 2007/08
• Sales: € 8,215 million (+8%, reported growth of +7%)
o Top 14: +10%
o Emerging markets: +17% / Mature markets: +2%
• Profit from recurring operations: € 2,114 million (+9%, reported growth of +11%)
• Group share of net profit from recurring operations: € 1,201 million (+10%)
• Operating margin (PRO / sales): 25.7%, an increase of +75 bps
• Net Debt / EBITDA ratio(2): 3.8 at 30 June 2012 vs. 4.4 at 30 June 2011
The company reported that sustained growth is still driven by emerging markets, with confirmed growth in mature markets. Full-year sales totalled € 8,215 million (excl. tax and duties), a sustained growth of +7%, resulting from:
• an organic growth of +8%, due to (i) continued very strong growth in emerging markets (+17%) and (ii) mature markets (+2%), which grew for the second consecutive year,
• a favourable foreign exchange effect of € 51 million, for a +1% positive effect over the full financial year, which turned positive in the second half of the year, as it was negative by € (99) million at the end of the first half,
• a group structure effect of -1%, primarily due to the disposal of certain Spanish and New Zealand activities in 2010/11 and certain Canadian activities in 2011/12.
Consolidated sales for the 4th quarter 2011/12 increased +9% to € 1,901 million, resulting from:
• a +4% organic growth,
• a positive +6% foreign exchange effect,
• a negative -1% Group structure effect.
Excluding technical effects (French destocking), organic growth for the 4th quarter is +7%, in line with the underlying trends noted at the start of the financial year: +8% in the first half of the year and in the 3rd quarter, excluding technical effects (French destocking and Chinese new year).
Sales by region: results driven by (i) a buoyant Asia/Rest of World, (ii) continued growth of premium brands in the Americas and (iii) a good overall performance in Europe, particularly Eastern Europe:
• Asia/Rest of World, with growth of +15%, remains the growth driver of the Group, primarily due to China, India, Vietnam, Taiwan and Travel Retail. Growth was also very strong in Africa/Middle East.
• Americas reported growth of +6%. In the US, growth accelerated to +5% (vs. +2% in 2010/11), driven by Jameson. The improved performance of Absolut in the 2nd half of the year should also be noted. Brazil’s sales grew +13%, driven by the Top 14 (+26%), particularly due to the success of Absolut and Scotch whiskies. Due to the reorganisation of the subsidiary, Mexico posted a decline of -12%.
• Europe, excluding France, recorded sales growth of +2%, with pronounced bipolarisation between East and West. In Eastern Europe, sales growth noticeably accelerated to +16% (compared to +9% in 2010/11), while sales in Western Europe declined -1%, a similar decrease as in the previous year (-2%). This decline is primarily attributable to Spain (-4%), Italy (-13%), Greece (-13%) and the UK (-4%).
• In France, sales declined -1% due to a decrease in spirits consumption following the excise duty hike of 1 January 2012 (+14% on average), which had a particularly adverse effect on the aniseed category. Despite this increase, certain brands posted a strong performance (Absolut +13%, Havana Club +13%).
Sales by brand: all-time record for the Top 14 (60% of Group), with significant price/mix, driven by Martell and whiskies
Top 14 volumes grew +3% to an all-time record (47.2 million 9L-cases), as did eight of its constituent brands: Absolut (+3%), Chivas (+7%), Jameson (+15%), Malibu (+6%), Beefeater (+6%), Martell (+10%), The Glenlivet (+15%), and Royal Salute (+20%).
In value, a significant +6% price/mix effect enabled the Top 14 to grow +10%. Six of these brands reported double-digit growth: Martell (+25%), Royal Salute (+23%), TheGlenlivet (+19%), Jameson (+18%), Perrier Joue¨t (+14%) and Chivas (+11%). Only Ricard declined -3% (the aniseed category in France was severely affected by the excise duty hike).
Priority premium wine volumes grew +2%. Campo Viejo and Graffigna continued to gain ground and Brancott Estate enjoyed renewed growth, offsetting the moderate decline of Jacob’s Creek. The “high-value” strategy implemented for these brands generated a +4% increase in full-year sales, and, more significantly, double-digit growth in their contribution after advertising and promotion expenditure.
Value growth of the 18 key local spirits brands accelerated overall to +8%. Local Indian whiskies remained just as buoyant (+26%). Other brands also reported double-digit growth: Passport (+22%) gained momentum, benefiting from the emergence of the middle class which it particularly addresses, as did ArArAt (+26%), Olmeca (+20%) and Something Special (+15%). The year remained difficult for Imperial and 100 Pipers.
Premium brands now account for 73% of Group sales, a two-percentage point increase compared to the previous year.
Significant increase in gross margin rate and advertising and promotion expenditure focused on the Top 14
Gross margin (after logistics costs) was € 5,047 million, an increase of +8%, with a gross margin to sales ratio which substantially improved to 61.4% in 2011/12, compared to 60.3% in the previous year (+111 bps). This was the combined result of:
• a favourable mix effect relating to the increased weight of the Top 14 and superior qualities, particularly for Martell and Jameson,
• price increases (+3% on average for the Top 14),
• tight control of input costs (increase of +2% excluding mix effects),
• a favourable foreign exchange effect.
Advertising and promotion expenditure reached € 1,571 million. The ratio to sales increased slightly to 19.1% with more than three quarters of investment focused on the Top 14 (higher ratio to sales than the Group average). Priority was given to emerging markets, +11%, while investments in Western Europe declined -2%.
Structure costs increased +8% to € 1,362 million, in line with sales growth. Resources are allocated based on market growth potential. Emerging markets received 63% of the increase, in particular to strengthen the distribution network in China (+31%), India (+27%) and Russia (+22%). Two subsidiaries were created in Vietnam and Sub-Saharan Africa. At the same time, structure costs increased below inflation in Western Europe. In total, in the 2011/12 financial year the structure costs to sales ratio was 16.6%, including an increase in investments devoted to strategic projects, particularly innovation (Breakthrough Innovation Group) and talent management (Pernod Ricard University).
