French spirits maker Pernod Ricard said that it now expects sales to flatline this year after a tough first six months, but is banking on improved demand in key Chinese and U.S. markets from the second half.
Pernod Ricard, which owns Martell cognac, Mumm champagne and Absolut vodka and had previously forecast a rise in annual sales, said strict control over costs would however drive margin expansion, with full-year organic operating profit set to grow at a low single-digit rate.
The world's second-largest spirits maker after Diageo said it would buy back €300 million worth of shares this year, having already repurchased €150 million of stock in the first half.
Profit from current operations in the first six months of its fiscal year to December 31 reached €2.144 billion, an organic decline of 3%, but slightly better than analysts' expectations of a 5.1% decline.
First-Half Sales
Sales at Pernod Ricard amounted to €6.59 billion in the first half, down 3% organically and on par with analysts' expectations as an economic slowdown in China dampened demand while inventory adjustments in the United States continued after a post-COVID surge.
In China, where sales fell 9% in the first half, Pernod Ricard said sentiment remained 'cautious' ahead of the Lunar New Year.
Pernod Ricard, like rivals Diageo or Rémy Cointreau, has seen strong growth over the past two years with sales lifted by home consumption during COVID and price increases.
Robust Performance
“We delivered a robust performance in the first half of the year, as we confidently steer Pernod Ricard through the normalisation of the spirits market, following two years of outstanding growth," commented chief executive Alexandre Ricard.
"I am convinced that our sound strategy, together with the dedication, agility, and exceptional engagement of all our teams around the world, will enable us to deliver our ambitions.”
Additional reporting by ESM
