PERNOD Ricard has signalled the tide could be turning in China as its overall underlying sales edged up by one per cent to £4.62 billion in the first half.

 

The owner of Paisley-based Chivas Brothers, which has toiled in China as austerity measures have weighed on spirits sales, reported a five per cent slump in net profits to £795m.

It cited continuing challenges in the world's second biggest economy, where pressure from economic slowdown and a crackdown on conspicuous consumption of luxury goods contributed to a 16 per cent drop in sales.

But it said the timing of Chinese New Year had distorted figures, with this year's first half not seeing the benefit of the celebration this time around.

Adjusting for the distortion, organic sales fell in China by six per cent, and rose by two per cent across the board.

Chinese New Year starts on February 19 this year.

Pernod, whose brands luxury spirits Ballantine's, Chivas Regal and Royal Salute, declared its brands had shown "good resilience" in the face of the ongoing conditions in China.

Martell Cognac recorded an improving volume performance, driven by its premium Nobilge variety, and made market share gains, according to wholesale data.

However volume depletions were hit by the Chinese New Year factor, and dropped by one per cent.

Scotch whisky fell by 9 per cent, based on stock depletions in high level outlets, which Pernod said was in line with market trends.

But it pointed to a market-beating performance by Ballantine's Finest, which is believed to be "riding on the emerging middle class opportunity."

The company said its position in China in the first half showed a "gradual improvement of underlying trends" compared with its 2013/14 financial year, however the recovery is still in its early stages.

A spokesman said Pernod's continuing investment in the Chinese market, illustrated by the launch of the Martell Noblige Black Tie Cognac in the first half shows, "it's still a region they believe in".

Noting that the continuing growth of the middle class in China, who are increasingly favouring western style drinks, augurs well, he said the first half had shown its brands begin to recover in certain types of outlets.

"When they talk about the long-term future of China and the growth of the middle class, they are talking about different types of drink," he said. "It's not just about whisky and Cognac, it's Champagne, wine and vodka."

Pernod said its growth over the period was driven by whiskies, including strong performances by Jameson, The Glenlivet, Ballantine's and Indian whiskies, and Champagne brands Mumm and Perrier-Jouet.

Pernod noted that sales across its Asia-Rest of World territory were stable at £1.8bn, though organic sales were down four per cent on the first half of last year.

The period saw a continued, strong performance in India, Africa-Middle East and in its travel retail divisions, in addition to the gradual improvement in China.

In Europe, Pernod's second biggest territory, sales were also described as stable at £1.6bn, having increased by four per cent in the first half of 2013/14.

A slowdown in eastern Europe, Germany and travel retail was offset by improving trends in Spain and the UK, the company said.

Pernod's Amercias segment, meanwhile, saw organic sales grow by two per cent to £1.2bn, driven by good performances in Brazil and travel retail.

However it cited a challenging business environment in the US.

Alexandre Ricard, chairman and chief executive office of Pernod Ricard, said: "Our H1 results are solid and in line with the guidance given in October.

"Our sales are gradually improving despite an environment that remains challenging. Heartened by this encouraging first semester, we confirm our full year guidance of growth in profit from recurring operations between one per cent and three per cent.

"I am confident in the strength of our portfolio of premium brands and of our global network that support our three strategic growth pillars: premiumisation, expansion and innovation."