02-9-2013 — /EuropaWire/ — In 2012/13, Pernod Ricard delivered asolid performance within, as anticipated, a less favourable environment than in 2011/12:
Reflecting on these results, Pierre Pringuet, Vice Chairman and Chief Executive Officer of Pernod Ricard, commented: “Despite a less buoyant environment than that of last year, we achieved our guidance.”He continued, “Our global and balanced exposure to emerging and mature markets will allow us to seize all opportunities. We therefore remain confident in our ability to pursue our growth.”
At its meeting of 28 August 2013, chaired by Danièle Ricard, the Pernod Ricard Board of Directors approved the financial statements for the 2012/13 financial year ended 30 June 2013.
FULL-YEAR AND QUARTERLY SALES
Full-year sales totalled € 8,575 million (excluding tax and duties), which included € 5,065 million from mature markets and € 3,510 million from emerging markets(2). This represents an increase of 4%:
Consolidated sales for the fourth quarter 2012/13 totalled € 1,925 million. This growth resulted from:
ANALYSIS OF SALES BY GEOGRAPHIC REGION
Asia/Rest of the World (40% of sales)
Dynamism remained sustained (+7%(1)) despite a slowdown compared with the previous financial year.
Martell (+16%(1)) remained the main growth driver with substantial price/mix (+7%(1)). This performance was driven by China (market growth, market share gains, restocking to standard levels),Travel Retail, Malaysia andIndonesia.
Indian whiskies (+19%(1)) remained very buoyant with good price/mix (+6%(1)), thanks in particular to premiumisation (Royal Stag Barrel Select and Blender’s Pride Reserve Collection).
The decline(1) of Scotch whiskies was largely due to China, South Korea and Thailand. The excellent performance(1) in the Middle East should be noted (especially Chivas in Turkey).
The good development(1) of the new growth drivers (Absolut, Perrier-Jouët, Mumm, Jameson and Jacob’s Creek) continued.
The performance of the regions’ main markets can be summarised as follows:
Americas(27% of sales)
Growth (+7%(1)) was driven by Premium(3) brands and the US.
The Top 14 grew +8%(1), thanks to Jameson, The Glenlivet, Absolut and Malibu in the US, Absolut and Martell in Mexico, as well as Chivas and The Glenlivet in Travel Retail.
Priority Premium Wines (+5%(1)) continued to grow with favourable price/mix.
Key local brands grew 7%(1), with double-digit growth(1) for Passport. The healthy development of Wiser’s was notably bolstered by the innovations launched in the flavoured American whiskey segment.
The performance of the region’s main markets can be summarised as follows:
Europe excluding France(25% of sales)Stability(1) in Europe excluding France with strong growth in the East and a decline in the West
Growth of the Top 14 (+2%(1)) was driven mainly by Jameson, Absolut, Chivas and Beefeater. These brands grew both in the East and in the West. Ballantine’s (Spain), Mumm, Perrier-Jouët, Malibu (UK) and Ricard declined.
Sales of Priority Premium Winesincreased (+1%(1)) thanks to Campo Viejo and Brancott Estate.
Key local brands (+2%(1)) were driven by the continued revival of ArArAt (up more than 50%(1) in 2 years) and Olmeca (up more than 50%(1) in 3 years) and the good performances of Seagram’s Gin (Spain), Passport (Eastern Europe) and Wyborowa (Poland).
Growth remained strong in Eastern Europe (+11%(1)):
Western Europe declined 3%(1), within an economic environment that remains challenging:
France(8% of sales)
The performance (-7%(1)) reflected a still challenging environment, compounded by unfavourable technical effects.
Sales declined following the very steep rise in excise duty introduced on 1 January 2012 and against the backdrop of a recession…
SALES ANALYSIS BY BRAND
Top 14
The Top 14 grew +5%(1):
Martell had a very good year (+15%(1), with price/mix of +10%(1)), partly boosted by restocking.
The excellent performance of Jameson(+17%(1)) means it has become the second largest contributor to Group growth. The brand reported double-digit growth (1) across all its major markets (US, Russia, South Africa, etc.)
White spirits reported a good overall performance(1):
Slowdown in the growth(1) of Scotch whisky:
The decline(1) of Ricard was due to reduced consumption in France (increase in excise duty and poor weather) and exacerbated by unfavourable technical effects. Nevertheless, the brand gained market share(6).
Mumm was in decline(1) (essentially due to France), but Perrier-Jouët grew(1)(greater global exposure) particularly in the Americas (+11%(1)) and Asia-RoW (+17%(1)).
Priority Premium Wines
Priority Premium Wines grew +2%(1), due to the implementation of a combined strategy of high-value and geographic diversification.
This growth was driven by a price/mix effect of +3%(1) and particularly buoyant sales in Asia (+15%(1)). In Europe, these brands reported growth(1) in both the West and the East.
Priority Premium Wines also reported sustained growth (+6%(1)) in their contribution after advertising and promotion expenditure.
18 key local brands
The overall performance of the 18 key local brands remained good (+6%(1)):
Premium(3) brands now represent75% of Group sales, a two-percentage point increase compared to the previous financial year.
ANALYSIS OF PROFIT FROM RECURRING OPERATIONS
Gross margin (after logistics costs)reached € 5,351 million, an increase of +5%(1).
The gross margin / salesratioimproved substantially to 62.4%,from 61.4%in the previous year(+98 bps, organic growth of +79 bps). These results were the combination of:
Advertising and promotion expenditure totalled € 1,644 million, an increase of +3%(1). A&P expenditure:
The advertising and promotion expenditure to sales ratio was stable (19.2%).
Structure costs increased +7%(1) to € 1,477 million. The structure costs to sales ratio was 17.2%.
Pernod Ricard continued to allocate resources to emerging markets(2), which accounted for almost 80% of the increase(1) in structure costs: strengthening of the distribution network (China, India, Russia, Africa, etc.) and creation of subsidiaries in Sub-Saharan Africa.
The increase(1) in structure costs was below inflation in Western Europe and stable(1) in France.
The end of the implementation of the Agility project explains the slowdown in structure cost growth(1) in the second half of the year.
Profit from recurring operations was € 2,230 million, an increase of +6%(1), in line with guidance.
The operating margin recorded its largest expansion (+42 bps(1)) in three years, due to:
The Group structure effect on profit from recurring operations was slightly unfavourable (mainly due to the disposal of the Scandinavian activities) at € 20 million. The positive foreign exchange effect (+€ 19 million) was primarily due to the strengthening of the USD and CNY.
Emerging markets(2) continued to increase their relative significance in profit from recurring operations: 44% in 2012/13 compared to 39% in 2011/12. This increase had a positive impact on margins.
ANALYSIS OF NET PROFIT
Financial income / (expense) from recurring operations was an expense of € 527 million, compared to € 509 million the previous year:
Corporate income tax on recurring operations was a charge of € 430 million, i.e. an effective tax rate of 25.2%. The increase (23.5% last year) was primarily due to new tax reforms, particularly in France (impact: € 25 million).
Group share of net profit from recurring operations reached € 1,255 million. Its sustained increase of +5% was primarily driven by the operating performance.
Non-recurring items included:
The Group share of net profit thus totalled € 1,189 million, an increase of +4%.
FINANCIAL DEBT, FREE CASH FLOW AND DIVIDEND
Net debt decreased significantly by € 635 million to reach € 8,727 millionat the end of June 2013.
This reduction resulted from a higher cash flow generation before translation adjustment (€ 474 million: improvement of +€ 89 million over 2011/12) and a favourable translation impact of € 161 million.
Cash flow generation before translation adjustment consists of (i) a solid Free Cash Flow of € 924 million, (ii) a net expense of € 15 million from disposals, acquisitions of shares and other items, and (ii) dividends of € 435 million.
Free cash flow was virtually unchanged compared to the previous financial year despite the substantial increase in long-term investments (strategic inventories and capital expenditure):
The net debt to EBITDA ratiocontinued to improve to 3.5(4) despite weakening currencies of certain emerging markets(2).
A dividend of € 1.64 (+4%) is proposed in respect of the 2012/13 financial year, in line with the customary policy of cash payout of approximately 1/3 of net profit from recurring operations.
Conclusion and outlook
Pernod Ricard delivered a solid performance in 2012/13 within a less favourable macro-economic environment.
For 2013/14, the macroeconomic outlook is likely to be as follows:
In this context, Pernod Ricard’s global and balanced exposure is an asset with which to seize growth opportunities.
Pernod Ricard therefore remains confident in its ability to pursue its growth.
1) Organic growth
2) List of emerging markets available in appendix
3) Retail price > USD 17 for spirits and > USD 5 for wine
4) Margin and debt ratios are based, for the USD, on the average rate for the relevant periods
5) Retail price > USD 200
6) Nielsen data
7) Source: IMF
About Pernod Ricard
Pernod Ricard is the world’s co-leader in wines and spirits with consolidated sales of € 8,575 million in 2012/13. Created in 1975 by the merger of Ricard and Pernod, the Group has undergone sustained development, based on both organic growth and acquisitions: Seagram (2001), Allied Domecq (2005) and Vin & Sprit (2008). Pernod Ricard holds one of the most prestigious brand portfolios in the sector: Absolut Vodka, Ricard pastis, Ballantine’s, Chivas Regal, Royal Salute and The Glenlivet Scotch whiskies, Jameson Irish whiskey, Martell cognac, Havana Club rum, Beefeater gin, Kahlúa and Malibu liqueurs, Mumm and Perrier-Jouët champagnes, as well Jacob’s Creek, Brancott Estate, Campo Viejo and Graffigna wines. Pernod Ricard employs a workforce of nearly 19,000 people and operates through a decentralised organisation, with 6 “Brand Companies” and 80 “Market Companies” established in each key market. Pernod Ricard is strongly committed to a sustainable development policy and encourages responsible consumption.
Pernod Ricard’s strategy and ambition are based on 3 key values that guide its expansion: entrepreneurial spirit, mutual trust and a strong sense of ethics. Pernod Ricard is listed on the NYSE Euronext exchange (Ticker: RI; ISIN code: FR0000120693) and is a member of the CAC 40 index.
Audit procedures on the consolidated financial statements have been carried out. The Statutory Auditors’ report will be issued following their review of the management report.
The Annual Financial Report related to this press release and the presentation to financial analysts are available at www.pernod-ricard.com.
PERNOD RICARD CONTACTS
Jean TOUBOUL / VP, Financial Communication & Investor Relations
T : +33 (0)1 41 00 41 71
Sylvie MACHENAUD / Director External Communications
T : +33 (0)1 41 00 42 74
Alison DONOHOE / Investor Relations
T : +33 (0)1 41 00 42 14
Carina ALFONSO MARTIN / Press Relations Manager
T : +33 (0)1 41 00 43 42
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Pernod Ricard Sales and Results FY 2012 2013
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