Pernod Ricard says China weakness hurts sales

Thursday 24 April 2014 09.36
Jameson net sales up 13% in the latest quarter
Jameson net sales up 13% in the latest quarter

French spirits maker Pernod Ricard posted weaker than expected third-quarter sales today, hit by persistent weakness in its major Chinese market, and kept a target for slower full-year profit growth.

The world's second-biggest spirits group behind Diageo owns Irish Distillers, which makes Jameson Irish whiskey.

Pernod also said today it had agreed to buy Kenwood Vineyards in Sonoma Valley, California, to beef up its premium wines portfolio in the US, its top market.

"This transaction illustrates Pernod Ricard's ability to seize tactical growth opportunities that can benefit our entire portfolio in key markets such as the United States," chief executive Pierre Pringuet said.

Pernod Ricard posted sales of €1.616 billion in the three months to March 31, flat year-on-year on a like-for-like basis and slower than its 2% year-on-year growth rate in the second quarter.

This was below the average of analysts' estimates of 1.2% growth.

On a reported basis, quarterly revenue fell 7% on the year due to weaker currencies notably in emerging markets. Net sales of Jameson rose by 13% in the period under review.

Pernod, the owner of Mumm champagne, Absolut vodka and Martell cognac, kept its forecast of underlying operating profit growth of 1-3% for the full year to June 30, slowing from 6% growth in the previous year.

Like rivals Diageo and Remy Cointreau, Pernod has been hit by a Chinese government crackdown on luxury gift-giving and personal spending by civil servants as well as by slowing economic growth in its second-biggest market.

Investors had been cautious about Pernod's trading in China after the group warned last month that demand in China could stay sluggish until 2015.

Recent trading updates from Diageo and Remy Cointreau also showed further pressure on the Chinese market.

Pernod Ricard makes 12% of sales and 15% of profits in China. Asia accounts for around 40% of its sales and 46% of annual profits.