PERNOD Ricard has served up an improved trading performance in China as the spirits giant lifted organic sales by two per cent in its latest financial year.
But the owner of Paisley-based Chivas Brothers, distiller of Ballantine’s, Chivas Regal and Royal Salute, warned the whisky market was still in decline in the world’s second biggest economy.
And the company highlighted to analysts “softer” conditions in China in the first quarter of the current year, amid worldwide concern over the slowing of the Chinese economy.
The Paris-listed drinks giant booked organic sales of €8.56 billion in the year to June 30, with profit from recurring operations rising by two per cent to €2.24bn in organic terms.
The period saw a marked improved on trading in China, where sales of premium spirits have been dented by economic slowdown and government-led austerity measures.
Pernod arrested its own slide in China and reported a two per cent fall in sales for the year, compared with a 23 per cent drop the year before.
The company put the improved performance down to a good Chinese New Year sales period.
It highlighted a gain in market share by Chivas, as well as the strong development of Glenlivet and Ballantine’s Finest, which made gains of 31 per cent and 10 per cent.
However, it warned that Scotch whisky depletions were still in decline in the troubled economy, dropping by 10 per cent during the year.
Martell, the company’s flagship Cognac, strengthened its position in China. Sales fell one per cent and described by Pernod as “stable”.
There was a double-digit percentage rise in sales on Martell’s Noblige brand, but the company admitted there were difficulties for Martell Cordon Bleu and XO in the market.
The improved position in China came as Pernod saw a return to growth in its Asia-Rest of the World territory, which saw a four per cent rise in organic sales growth to €3.45bn.
Beyond that Pernod, which said it gained share in most markets, highlighted a two per cent rise in organic revenues in the Americas to €2.38bn.
The USA was stable for the full year, although the company took a €404m write-down on its Absolut vodka brand reflecting challenging conditions in the market.
Sales in Europe were steady at €2.73bn, with a return to growth in Spain (two per cent) offset by difficulties in Eastern Europe and in travel retail.
The company, which launched the £25m Dalmunach Distillery in Speyside in June, said its top 14 brands had returned to growth over the year, rising two per cent compared with a two per cent fall the year before.
Alexandre Ricard, chairman and chief executive officer, said: “Our full year results are solid, delivering improved sales and profit from recurring operations in line with guidance. Our strategy has remained consistent and is delivering results.
“For FY 2015/16, despite a challenging and volatile macroeconomic environment, we aim to continue to gradually improving our business performance. We will continue to support priority brands and innovations while focusing on operational excellence.”
Analysts at Barclays described the results as disappointing, adding that “cautious comments around China and [a] tougher Latin American backdrop are likely to keep a lid on forecasts”.
But they expect EBIT (earnings before interest and taxation) rates to rise in the current year as “mix dilution from China moderates”, and with consumer trends still strong in the US.
Canaccord Annuity said it expects full-year forecasts for 2015 to fall.
Pernod Ricard proposed a dividend of €1.80, up 10 per cent on last year.
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