Strong U.S., China demand makes Pernod Ricard more optimistic on sales outlook – Metro US

Strong U.S., China demand makes Pernod Ricard more optimistic on sales outlook

A logo is seen on a bottle of the Ricard
A logo is seen on a bottle of the Ricard aniseed-flavoured beverage displayed during French drinks maker Pernod Ricard news conference to announce the company annual results in Paris

PARIS (Reuters) -Pernod Ricard is more optimistic about its outlook for fiscal year 2022 after strong demand in the United States, China and Europe helped the French spirits maker beat first-half profit and sales forecasts, lifting its shares by over 3%.

Pernod Ricard, which owns Martell cognac, Mumm champagne and Absolut vodka, said it now expected “strong” sales growth in its 2022 fiscal year, which ends on June 30, despite potential disruptions tied to the COVID-19 virus.

Previously it had guided for “good” sales growth.

The world’s second-biggest spirits group said sales growth would drive operating margin expansion, although this would moderate from the first half due to increased investments.

Resilient consumption by people staying at home, the reopening of bars and restaurants and a gradual recovery in travel retail would fuel sales growth across regions, it said.

Chairman and CEO Alexandre Ricard told Reuters, however, that it was too early to make a quantitative guidance for sales or profit growth in fiscal 2022.

“We are giving a qualitative guidance. A key unknown is the performance during the Chinese New Year this month,” he said in a phone interview.

“We will have more visibility in mid-March, though we remain very confident over growth momentum,” he added.

Ricard later told analysts there was a “slightly softer start” to Chinese New Year when compared to last year.

The strong first half reflected a 9% jump in sales in the United States, Pernod’s top market, with growth driven by Jameson whiskey which benefited from strong demand in bars and restaurants. In China, sales growth was 14% with very good demand during the Mid-Autumn festival.

With recurring free cash flow of 1.4 billion euros ($1.60 billion) as of the end of December, Pernod Ricard also increased its share buyback programe by 250 million euros in the first half.

Shares in Pernod Ricard, which have slipped 9% this year after rising 35% in 2021, were up 3% in morning trade.

Alexandre Ricard told Reuters the group would also continue to look for bolt-on acquisitions, notably to beef up its fast-growing Specialty brands portfolio.

“Although guidance remains non-quantitative, we note more positive language, ‘strong’ versus ‘good’ sales growth, with margin expansion, plus an incremental 250 million euros in buybacks for FY22 on top of the 500 million euros already announced,” Trevor Sterling from Bernstein wrote in a note.

Profit from current operations in the six months to Dec. 31 reached 1.998 billion euros, an organic rise of 22% that was more than analysts’ expectations for a 16.7% rise.

Sales totalled 5.959 billion euros in the first half, representing an organic rise of 17%, compared with analysts’ expectations for a 15.1% rise.

Last month, rival Diageo reported first-half sales up nearly 16%, buoyed by high-end spirits for home use while bars increased orders as they reopened after lockdowns.

($1 = 0.8752 euros)

(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta, Subhranshu Sahu and Susan Fenton)