CHIVAS Brothers, the Scotch whisky distiller, has seen profits slide by more than 16 per cent amid headwinds in key export markets.
The Paisley-based company, part of drinks giant Pernod Ricard, cited well-documented pressure in China, unstable market conditions in Venezula and declining whisky consumption in Spain as pre-tax profits fell to £416,005 in the year ended June 30.
Chivas, whose brands include The Glenlivet, Ballantine's and Royal Salute, also highlighted the impact of strong competition in Thailand and changing drinking trends in South Korea, where consumers are believed to be broadening their tastes to other categories beyond Scotch.
Turnover fell by seven per cent to £921 million, accounts newly available for Companies House Reveal, with foreign exchange rates accounting for three per cent of the decrease. However the company said sales had increased in the "difficult environment" of Africa following the expansion of the Pernod distribution network.
And since year-end Pernod has highlighted improved fortunes for its brands in certain markets in a trading update issued in February.
Paris-based Pernod signalled last month that the tide could be turning in China, where luxury spirits have been hit by government-led austerity measures. That came as it reported an underlying sales increase of one per cent to £4.62 billion in the first half of its current year.
Pernod, which also owns Chivas Regal and Martell Cognac, also flagged improving trends in Spain, where Scotch whisky distillers in general have seen consumption fall in light of the country's broader economic difficulties. It described trading in Europe as stable, with the pick-up in Spain and the UK offset by a slowdown in Germany, eastern Europe and the travel retail sector.
The latest accounts for Chivas point to an erosion of gross profit margin - described as the "key financial performance indicator that the directors rely upon - to 58.5 per cent from 60 per cent.
This was attributed by the directors to the "adverse foreign exchange impact and challenging business environment".
However the company underlined its confidence in the future prospects for Scotch in global markets by maintaining levels of capital expenditure to ramp up production capacity.
Pernod, in the midst of an expansion programme which is seeing it invest about £60m a year in upgrading its production capability, noted that its biggest project of the year was the development of the new Dalmunach distillery in Speyside. The accounts show that operating profits for the year were up 14 per cent to £383,527, however the directors note that the previous year's administrative expenses included a one-off contribution of £60.5m to the Chivas Brothers pension scheme.
"Excluding this one-off impact, the decrease in operating profit is lower than the reported decrease in gross profit due to strong cost control," the directors state.
Chivas employed an average of 1,574 staff during the year, six more than in 2013, with 1,160 of that number engaged in production roles. Employment costs rose to £81.2m from £79.8m, with directors' remuneration narrowing to £3.6m from £3.7m in the prior year.
The highest paid director received emoluments of £1.02m, compared with £1.13m in 2013.
Writing in the Chivas accounts, the directors state the results had been in line with expectations, noting that they are "satisfied with the current trading performance of the company".
"They remain optimistic for the future having considered market forecasts and social trends and therefore continue to invest in production facilities such as the new Dalmunach malt whisky distillery in Speyside," said finance director Herve Fetter, who wrote the report.
Meanwhile, Chivas has replaced its traditional internal website with a digital hub that supplies a mobile website to tablet computers. It enables all its employees to access news and information from its 29 sites in the UK, from Orkney in the north to Plymouth in the south.
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