Strong sales in China, India drive Pernod Ricard profit growth

  • For the year ahead, Pernod - the world's second-biggest spirits group behind Britain's Diageo - forecast further profit growth in spite of an uncertain geopolitical and monetary climate. It gave no further details.
  • Pernod Ricard forecast underlying profit growth from recurring operations of between 5 percent and 7 percent for the full year ending June 30, 2019.

French spirits maker Pernod Ricard on Wednesday said sales and profit growth accelerated in full year 2017/18, driven by strong demand in China and India, as well as robust sales in the United States, its top market.

The maker of Martell cognac and Mumm champagne handed investors a 17 percent dividend hike. For the year ahead, Pernod — the world's second-biggest spirits group behind Britain's Diageo — forecast further profit growth in spite of an uncertain geopolitical and monetary climate. It gave no further details.

Pernod Ricard predicted a "very strong" first quarter, saying it would benefit from a low comparison base in India where it has faced setbacks including a ban on liquor outlets.

It also forecast a boost in the July-September period from an earlier Mid-Autumn Festival in China, where it banks on a thirst for premium drinks from a fast rising middle-class.

Speaking on both China and India, Alexandre Ricard, the chairman and chief executive officer Pernod Ricard, said that the key drivers there were the emerging middle class.

"We're in investment mode, as well, in both these counties as they drive our growth, currently, and also for the medium to long-term," he told CNBC's "Squawk Box Europe."

Bottles of Jameson Irish whiskey, Havana Club rum, Beefeater gin, Absolut Vodka, and Olmeca tequila, all produced by Pernod Ricard SA.
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Bottles of Jameson Irish whiskey, Havana Club rum, Beefeater gin, Absolut Vodka, and Olmeca tequila, all produced by Pernod Ricard SA.

Pernod Ricard forecast underlying profit growth from recurring operations of between 5 percent and 7 percent for the full year ending June 30, 2019.

This would compare with the 6.3 percent rise achieved in the 2017/2018 financial year, when profits came in at 2.358 billion euros ($2.70 billion), in line with an average forecast of 2.36 billion euros in an Inquiry Financial poll for Thomson Reuters.

Sales growth for the 2017/18 full-year accelerated to 6 percent from 3.6 percent the previous year, spurred by a 17 percent jump in China, 14 percent in India and 4 percent in the United States. Nonetheless, shares fell 2.1 percent as European markets opened Wednesday morning.

Ricard called the challenge from smaller craft brands an "opportunity" for his company. "There's room for both big brands and small local or craft brands," he told CNBC. "By the way we have both. We've been actively managing our portfolio of brands through M&A (merger and acquisition) activity, with partnerships or acquisitions," he added.