Pernod Ricard shows ‘outstanding growth’ of sales in China
Alexandre Ricard, the chairman and chief executive of Pernod Ricard, said in Paris this morning that the company’s full year results to the end of June “make me very proud”. They were “great results” he said.
The figures were in line with analysts’ expectations but the shares rose by more than 1% in early trading, spurred by the company announcing a share buyback programme of up to €1 billion over the next three years to enhance shareholder value.
They were also boosted by the deal to purchase Castle Brands of Louisville, Kentucky, for $223m plus debt, which will add Jefferson’s bourbon to the portfolio and strengthen the French group’s position in the key US market.
The most recent financial year was the first in a three-year strategic plan named “Transform and Accelerate” Mr Ricard said. It was an “excellent year”, driven largely by Asian markets, including travel retail. China, he said, “showed outstanding growth” [+21%] and was “much beyond our guidance” led by Martell which now has 42% of the market for cognac.
The company also unveiled a €159m investment in a single malt distillery at Emeishan in Sichuan, China. The facility will open in 2021 supply the local market and act as a visitor centre.
While Pernod Ricard’s American performance was roughly in the line with the overall market at 4% growth, its Indian market put on 20%.
Ricard told the Financial Times: “Today’s results are the consequence of yesterday’s investments and today’s investments will produce tomorrow’s results.”
That will be music to the ears of Elliott Management, the US activist investment company with a 3% stake in Pernod Ricard. It took the holding with the aim of improving shareholder returns from the French giant, narrowing the profitability gap with Diageo and making Pernod Ricard’s board more widely based.
Since Elliott took its stake, Pernod Ricard’s shares have put on 12% while Diageo’s have gained 21%.
That said, the strategies behind Pernod Ricard’s latest strong performance – profit from recurring operations up 8.7% – were in place before Elliott took its stake last December. But the share buyback programme and the increase in the dividend ratio to 50% underline M. Ricard’s desire to maintain what he says are “ongoing and cordial” relations with the US investor. Equally he emphasised they were treated no differently to any other shareholder.
In addition to the very strong balance sheet at the end of June which paves the path for future investment and strategic acquisitions, Pernod Ricard has also opened up its board with the appointment of two new directors, Phillippe Petitcolin of high-tech group Safran and Esther Berrozpe Galindo, formerly of Whirlpool.
Pierre Pringuet, the deputy chairman who oversaw Pernod Ricard in the period between Patrick Ricard’s death in 2012 and Alexandre Ricard’s appointment three years later, is stepping down.
Pringuet was the driving force behind several significant acquisitions during his long career at Pernod Ricard, notably Absolut vodka, which is now one of the group’s core brands.