Pernod Ricard Volume Sales Down, Lowers Expectations

Organic growth for Q3 was adversely impacted by clients’ willingness to decrease their inventories due to credit tightening but also by Pernod Ricard’s greater focus on receivable risk management.

15/04/09 Pernod Ricard has reported consolidated net sales (excluding tax and duties) for the first nine months of 2008/09 fiscal year (1 July 2008 to 31 March 2009) increased by +9% to € 5,557 million. Organic net sales growth was +0.3% in a more challenging environment driven downwards principally by, on the one hand, a slowdown in Eastern Europe, in Duty Free markets and in the ontrade in most mature markets and, on the other hand, a significant de-stocking from wholesalers and distributors. The change in Group structure (+12%) is related to the integration of Vin & Sprit which started 23 July 2008. The negative foreign exchange impact (-3%) is mainly due to the depreciation of the pound sterling, Korean won, Australian dollar and Indian rupee against the euro, and is partially compensated by the appreciation of the American dollar and the Chinese yuan. Spirits and Wines activities achieved organic growth of +0.7% and -1.3% respectively.

The top 14 strategic brands (excluding Absolut) grew organically by +0.4% in value and -4% in volume due to a favourable mix/price effect. The best performing brands in value(2) were: Martell (+13%), Jameson (+11%), The Glenlivet (+7%), Havana Club (+6%) and Mumm (+4%). Absolut made strong progress on each key market outside the United States with the following trends covering the period from the beginning of our fiscal year to date : Spain +6%, UK Off-trade +20%, Australia +8%, Brazil +16%, France +10%, Germany +41%, Italy +6%, Mexico +15%… In the US, the brand declined by -4%, though on a high comparison basis.

In the 3rd quarter 2008/09, consolidated net sales were slightly down 2% to € 1,345 million, with -12% organic growth, negative foreign exchange impact of -0.7% and group structure effect of +10%. Organic growth for the quarter was adversely impacted by clients’ willingness to decrease their inventories due to credit tightening but also by Pernod Ricard’s greater focus on receivable risk management.

The relative weight of each region, Asia/RoW, Americas, Europe and France is similar to that reported twelve months ago apart from a slight increase of the Americas which benefited from a positive change in Group structure given the integration of Vin & Sprit’s portfolio in the US as well as the appreciation of the American dollar against euro over the first nine months of the 2008/09 fiscal year.

For fiscal year 2008/09, Pernod Ricard now aims for organic growth(3) in profit from recurring operations of between +3% and +5% (versus between +5% and +8% previously announced), thus reflecting a higher than initially anticipated level of de-stocking. The Group confirms its target of an average cost of borrowing below 5%. The confirmation of a significant organic growth in profit from recurring operations, the low cost of debt and the successful integration of Vin & Sprit with accelerated implementation of synergies allow the Group to confirm its guidance of double-digit growth in Group share of net profit from recurring operations, which for the first time should exceed € 1 billion over the full 2008/09 fiscal year.