Pernod Ricard SA, France’s biggest distiller, started a process to promote Alexandre Ricard to the dual role of chairman and chief executive officer following the death this month of his uncle Patrick Ricard.
Alexandre Ricard, 40, will become deputy CEO and chief operating officer immediately, before taking on the top posts at the end of January 2015, the maker of Absolut vodka said today. It also reported growth in full-year profit that beat its forecast, though missed analyst estimates.
The succession plan was put in place after the sudden death on Aug. 17 of Patrick Ricard, who led the company for more than three decades and had been chairman since 2008. Alexandre Ricard will face the challenge of continuing to grow the company’s revenue and profit amid competition from other drinks companies including Diageo Plc, the world’s biggest distiller, and difficult economic conditions in Europe.
Pernod Ricard is having a “changing of the guard,” though its growth is “on track,” Gideon Adler, an analyst at Investec Securities, wrote in a note to investors.
CEO Pierre Pringuet, who proposed Alexandre Ricard as his successor, will leave in January 2015 upon reaching mandatory retirement age, the distiller said.
Alexandre Ricard has worked at its Irish Distillers unit, which includes the fast-growing Jameson whiskey brand, and has run the distribution network since September 2011.
Other management changes announced today included the appointment of Daniele Ricard as chairman to succeed her late brother. The 73-year-old executive said in the statement that she reiterates the Ricard family’s commitment “to pursue the group’s strategy and development.”
Pernod said today that it expects a slowdown in the pace of global economic growth this year, in emerging as well as mature markets. Europe will continue to be tough because of the crises in the debt market and government debt-reduction measures, the distiller said. The company will set its annual profit forecast in October.
“My assumption is that the euro will continue, but it’ll require effort to cut deficits,” Pringuet said today on a call. “We do anticipate the same sort of slightly negative trend” in Europe this year, even as sales in eastern Europe are accelerating, he said.
Pernod, which sells Chivas Regal whisky, said so-called organic operating profit rose 9 percent in the year ended June 30, compared with its projection for growth on that basis of close to 8 percent. The increase missed the median estimate of 12 analysts surveyed by Bloomberg News for a 9.6 percent gain.
Pernod dropped as much as 2.6 percent in Paris trading and was down 1.5 percent at 86.50 euros as of 2:33 p.m.
First-half sales at Pernod rose 8 percent, excluding the effects of acquisitions, disposals and currency fluctuations. That beat the 7.2 percent median estimate, driven by 17 percent growth in emerging markets including China, where consumers are buying more expensive alcohol including its Martell cognac. Revenue in developed markets rose 2 percent on the same basis. Fourth-quarter revenue grew 4 percent.
Growth was aided by a 6 percent improvement in price and mix, Pringuet said, boosted by innovations including behind its Malibu brand.
Total sales gained 7.5 percent to 8.2 billion euros. Pernod said it expects “continued good growth in the U.S.,” the world’s largest spirits market, and said sales grew 5 percent this year in the country, driven by Jameson Irish whiskey.
So-called organic sales in its home market of France declined 1 percent, hurt by a Jan. 1 tax increase.
In Europe outside of France, sales improved 2 percent as “pronounced bipolarization” between east and west Europe restrained growth, Pernod said. Sales fell 1 percent in western Europe, while revenue in eastern Europe grew 16 percent.
Sales in Asia and the rest of the world grew 15 percent, the company said, aided by demand in China, India and Vietnam.
Pernod has been seeking to pay down debt. The distiller had targeted a ratio of net debt to earnings before interest, tax, depreciation and amortization of close to 3.9 as of June 30, and today reported a ratio of 3.8.
Earnings before interest and tax, excluding some items, rose to 2.1 billion euros from 1.9 billion euros.
Pernod is seeking to maintain a “solid investment grade,” Chief Financial Officer Gilles Bogaert said today in an interview. It was raised to the lowest investment grades late in 2011 by Standard & Poor’s and Moody’s Investors Service. The company is open to “bolt-on” acquisitions, he said.
Patrick Ricard was 67 when he died and had led the company as CEO for three decades, presiding over transformational deals including the acquisitions of Allied Domecq Plc and Vin & Sprit AB, a 2008 transaction for 5.28 billion euros ($6.6 billion) which gained the company Absolut vodka. He took the role of chairman in 2008, with Pringuet becoming CEO.