Pernod Ricard's Growth Fuelled by Original Premium Brands

24/03/06 Number two wines and spirits group Pernod Ricard has recorded strong growth in first half results due to the dynamism of its original premium brands and a rapid and successful integration of Allied Domecq. Pernod Ricard original premium brands continued their spectacular growth (Chivas +13 %; Jameson +12 %; The Glenlivet +10 %; Martell +9 %) and were the major feature of 4.5% organic growth in sales. The strong profitability of these brands generated a sharp rise in the gross margin from 60.1 % to 61.3 %. Their higher profitability supported a sustained advertising and promotion effort for our key brands (+ 11 % in the period). Overall, the contribution after advertising and promotion of the original brands was EUR 815 million, thus confirming their dynamism with organic growth of 5%.

Pernod Ricard said that the contribution generated by the Allied Domecq brands, from this first half year period of 5 months, is in line with expectations (EUR 486 million contribution after advertising and promotion) and reflects a comparable level of profitability to that of the Pernod Ricard original brands (rate of brand contribution to sales of 39.2% vs 40.2% for Pernod Ricard original brands). This good performance was achieved against a background of integration and cleaning up certain markets (destocking, cessation of parallel sales).

The rapid implementation of the integration and the cost synergies generated from this half year has enabled a cost saving equivalent to 40% of the final objective. Structure costs were thus EUR 534 million equivalent to 16.3% of sales compared to 17% for the same period of the previous year. This, together with the good profitability of the new portfolio, led to strong growth of 70% in profit from operations to EUR 767 million and an immediate improvement in the operating margin of Pernod Ricard which increased from 23 to 23.5%.

All regions reported growth in profit from operations however, the Americas led the way and achieved a doubling of profit. Organic growth for the period was particularly strong in Asia/Rest of the World, with an increase of 14.6% in the contribution after advertising and promotion. The results of this half year highlight the successful internationalisation of Pernod Ricard that now achieves more than 50% of its profits from the high growth regions of Asia and the Americas.

Pernod Ricard said that the sale of Dunkin Brands and Glen Grant in the 1st quarter of 2006 for around EUR 1.5 billion, net of tax, should further accelerate the debt reduction in the second half year.