(News Bulletin 247) – The spirits group has published mixed results for its 2022-2023 financial year, with in particular an increase in sales below expectations in the “America” zone in the fourth quarter. The company anticipates a “modest” first quarter.

Pernod Ricard has just put an end to the summer season of CAC 40 results. The spirits group is one of the two residents of the index (with Alstom) to be in a staggered financial year, with accounts closed at the end of June. This explains why the company known for its brands Martell, Absolut or Jameson publishes annual results at the end of August.

Regarding this 2022-2023 copy, the overall impression is “mixed”, judge Royal Bank of Canada.

Over the whole of the twelve months of this financial year, Pernod Ricard posted revenues of 12.137 billion euros. This turnover reflects growth of 13% in published data and 10% on a comparable basis, against an organic increase of 9.5% expected by analysts, according to Stifel.

In the fourth quarter alone (April to June), the group generated sales of 2.63 billion euros, up 19% like-for-like.

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America in the dark

This last figure was driven by the “Asia-Rest of the World” region, where organic sales growth was 36%. Pernod Ricard benefited from a rebound in growth in China, while activity had been “soft” in the previous quarter, with a rather weak Chinese New Year, explained to analysts the company’s CEO, Alexandre Ricard.

But the Americas region, with the United States in the lead, did not live up to expectations. The company’s revenues certainly posted like-for-like growth in the fourth quarter of 3%, but analysts expected twice as much, namely an increase of 6%.

“The Americas were the weak point, the United States accelerated slightly in the fourth quarter to end the year in stagnation (over the first nine months of the financial year the United States posted a decline of 1%)”, notes Royal Bank of Canada.

As pointed out by other spirits groups, like Rémy Cointreau, the American market has been undergoing a phase of normalization for several quarters after having experienced two years of quite extraordinary growth. In addition, certain trends can be observed, with for example a more pronounced taste of Americans for tequila, which is gaining ground against entry-level cognacs.

Alexandre Ricard thus considered that the dynamic of underlying demand in the United States was certainly positive, but lower than its potential level in the medium term, due to this normalization. The leader estimated the growth rate of current demand around 1-2% per year.

Share buybacks and dividend increase

Beyond revenues, Pernod Ricard announced that it had generated current operating income (COI) of 3.35 billion euros, up 11%, for a corresponding margin of 27.6%. This indicator was penalized by significant unfavorable exchange rate effects, of 70 million euros, which caused it to be lower than expected. Analysts were indeed expecting a trading profit of 3.47 billion euros for a margin of 28.6%.

Pernord Ricard can nevertheless be proud of one fact: “it has overtaken” its British rival Diageo “during the past financial year both on sales (organic sales growth of 10% against +6.5% for Diageo) and on profitability (underlying organic operating margin up 30 basis points compared to -30 basis points for Diageo) thanks to less exposure to the difficult American market”, notes Stifel.

The net profit of the French group increased by 13% over one year to 2.26 billion euros.

Regarding its outlook, Pernod Ricard did not give a quantified target for the 2023-2024 financial year but indicated that it “expects diversified revenue growth over the whole year, with a more modest start in first quarter, amplified by a high basis of comparison”. Alexandre Ricard told Reuters to expect lower sales in the first quarter due to a difficult macroeconomic environment, as well as in the Americas region, due to a high basis of comparison.

Current operating margin is expected to rise excluding currency and scope effects.

Regarding the return to the shareholder, Pernod Ricard announced a share buyback program of between 500 million euros and 800 million as well as an increase in its dividend by 14% to 4.7 euros per share.

On the Paris Stock Exchange, the Pernod Ricard share suffered, losing 3.7% around 10:10 a.m., the largest drop in the CAC 40. It dragged in its wake the Rémy Cointreau share, which lost 2.3%.