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Pernod Ricard profit rises 2%, cautious on China

French spirits maker Pernod Ricard reported full-year 2014/15 underlying profit growth of 2 percent on Thursday, slightly below analysts' expectations.

A 404 million euro ($456 million) impairment charge on its Absolut vodka, which faces lower U.S. growth, weighed on net profit.

Shares of the spirits maker traded down around 4 percent on the results, with Pernod Ricard the only company on the French CAC 40 index trading in negative territory.

Tequila shot
Bhofack2 | Getty Images

The world's second-biggest spirits group behind Britain's Diageo handed investors a 10 percent dividend hike and boasted cost cuts and improving cognac sales in China.

Pernod Ricard said that in a macroeconomic environment that was "challenging and volatile", it would continue to gradually improve its business performance in the current year that started on July 1, cautioning that Chinese sales were off to a "soft" start in a "tough environment".

The maker of Absolut, Martell cognac and Jameson whiskey faces slow growth in two key markets - China and the United States - and Chairman and Chief Executive Alexandre Ricard has made boosting sales a priority.

The rise in profit from recurring operations to 2.238 billion euros ($2.54 billion) for the year ended June 30 was in line with Pernod Ricard's guidance for underlying operating profit growth of 1 to 3 percent, while analysts had on average expected 2.5 percent growth.

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.

Pernod Ricard makes 12 percent of sales and 15 percent of profit in China, its largest market after the U.S.

The situation slightly improved in China, helped by a good Chinese New Year, with full-year sales down 2 percent like-for-like after declining 3 percent in the first nine months of the year and falling 23 percent in 2013/14.