It says the 7% sales decline was due to a “highly unfavourable foreign exchange effect”.
Sales were adversely affected by one market, China (-23%):
- Asia-Rest of the World -4%; outside China +5%;
- improvement in Europe (+2%);
- slow down of growth in the Americas (+2%) due to the US and travel retail
The Top 14 brands declined 2% as a result of a slight reduction in volumes and unfavourable mix (decline of Martell in China). The company says despite a more challenging business environment, pricing remained solid at +2%. The performance of ‘Key Local Brands’ (+4%) was positive, supported by positive pricing.
Pernod’s financial statement says the foreign exchange impact was highly unfavourable (€-199 million on PRO, as announced) and had a significant impact on the reported change in profit from recurring operations (-8%).
The net financial expense from recurring operations improved by €98m due to a significant reduction in the cost of debt to 4.6% (compared with 5.3% for the 2012/13 financial year).
At the end of June, net debt had reduced by €374 million to €8.4bn.
Pernod Ricard CEO Pierre Pringuet said: “Despite an environment that was more difficult than anticipated, we have delivered the guidance announced in February, proof of everyone’s commitment, which I would like to commend. We are seriously committed to the Allegro project: this operational efficiency project must enable us to maximise our future growth while generating a hard figure of €150 million of savings.”
Deputy CEO & COO Alexandre Ricard added: “In this context which will remain challenging, we anticipate a gradual improvement in our sales growth, and we will increase the investment behind our brands and priority innovations in order to sustain long-term growth.”
Euromonitor senior alcoholic drinks analyst Jeremy Cunnington comments: “Like Diageo, Pernod Ricard has been impacted by the weaknesses in emerging markets, particularly on Asia-Pacific and China. The company needs greater balance and to continue to develop its geographic presence further especially in the Americas and Africa and the Middle East which should include the possibility of M&A in those regions to fill in gaps.”