Pernod Ricard, the world’s second-largest distiller, plans to eliminate jobs as it seeks to generate 150 million euros ($198 million) of savings following a slump in demand in China.
The cuts, which represent about 900 jobs or 5 per cent of the Paris-based distiller’s workforce, are part of a program of measures to help the company operate more efficiently, Chief Executive Officer Pierre Pringuet said today in a phone interview.
Pernod reported an 8 per cent drop in annual earnings as currency fluctuations and a Chinese government clampdown on conspicuous consumption weighed on revenue growth. Earnings before interest, taxes and some one-time items totaled €2.06 billion euro, the maker of Absolut vodka said. Analysts predicted €2.08 billion euro, the average of 18 estimates, according to data compiled by Bloomberg.
“These are moderately disappointing results,” James Edwardes Jones, an analyst at RBC Capital Markets, said in a note to clients. “We believe that improving profitability is geared to a recovery in” Pernod’s so-called top 14 brands.
Sales of Pernod’s so-called top 14 brands, which include Chivas Regal scotch and Kahlua liqueur, fell 2 per cent, dragged down by Martell cognac in China, Pernod said
The stock rose 1.3 per cent to 89.20 €euro at 9:14 a.m. in Paris.
Savings Plan
Pernod, which generated €30 million euro of savings in fiscal 2014, sees €75 million euro of savings in the 12 months through June 2015 and the remainder in the following two years, the CEO said.
Operating profit rose 2 per cent, excluding the effects of acquisitions, disposals and currency fluctuations, within the distiller’s 1 per cent to 3 per cent growth forecast.
Pernod is cutting jobs and pushing less expensive liquors such as Ballantine’s whisky in response to plunging demand for premium cognac in China amid a crackdown on lavish spending by government officials. The company, which gets more than a third of its revenue from Asia, in June predicted an improvement in China next year as inventory levels settle.
While the company’s business environment “will remain challenging, we anticipate a gradual improvement in our sales growth,” Deputy Chief Executive Officer and Chief Operating Officer Alexandre Ricard said in the statement.
Annual revenue totaled 7.95 billion euros, showing no growth on an organic basis. Currency fluctuations reduced sales by 6 percent.
Organic sales fell 23 per cent in China and declined 4 per cent overall in Asia and the rest of the world region, Pernod said. Sales growth slowed in the Americas, growing 2 percent, due to the US and travel retail markets. Europe showed a “marked improvement” with sales there growing 2 per cent.
Bloomberg News edited by ESM
