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Pernod confident on sales momentum as US, China lift profits

French spirits maker Pernod Ricard said it was confident its sales momentum would continue this year after a rebound in demand in China and the US helped it to deliver stronger-than expected annual profits.

With recurring cash flow at a historical high of 1.745 billion euros at end-June, Pernod, which bought a minority stake in US wines and spirits company Sovereign Brands, also said it would resume its US$590.60 million buyback programme for the fiscal year 2021/22.

The owner of Mumm champagne, Absolut vodka and Martell cognac, did not provide specific operating profit guidance for the year 2021/22 that started on July 1, but said its first quarter would be “very dynamic”.

“We are giving a qualitative guidance for the full year, good sales momentum supported by on-trade recovery, resilient off-trade, dynamism in e-commerce,” Finance chief Helene de Tissot told Reuters.

However, she said Pernod Ricard remained “very cautious” concerning travel retail prospects over the next 10 months because of ongoing pandemic restrictions.

Over the 12 months to June 30, profit from recurring operations reached $2.86 billion, an organic rise of 18.3 per cent. This exceeded the company’s guidance for a profit rise of as much as 17 per cent.

“Pernod Ricard FY 2021 reflects a strong recovery despite residual Covid weakness in travel retail and in India,” Berstein analysts said in a note. Sales reached $10.4 billion, an organic rise of 9.7 per cent, reflecting a 16-per-cent jump in sales in the US and a 14 per cent rise in China.

In the fourth quarter alone sales rose 57 per cent from a year earlier, as bars and restaurants reopened in the US and in Europe as Covid restrictions eased.

Asked whether Pernod Ricard could be at risk from China’s possible plans for wealth redistribution and clamp down on high incomes, Chairman and CEO Alexandre Ricard told a news conference: “If indeed there is an increase in the purchasing power of the (Chinese) middle class, it could be a positive for Pernod.”

The world’s second-biggest spirits group after Britain’s Diageo, had raised its organic profit growth guidance for 2020/21 to 16 per cent from 10 per cent. And last month, Pernod said a US court ruling that it could claim a refund on spirits exported from the US would add a further 1 per cent to its organic profit growth.

The group reiterated what Alexandre Ricard called a “framework” of 4-7 per cent sales growth and 50-60 basis points operating leverage per year for the medium-term. It will hold a capital market day “probably in spring”.

  • Reporting by Dominique Vidalon; Editing by Benoit Van Overstraeten and Barbara Lewis, of Reuters.

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