Pernod Forecasts Profit Growth That May Miss Estimates

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Pernod Ricard SA predicted full-year earnings growth that may miss analysts’ estimates after first-quarter sales declined in Europe.

Adjusted earnings before interest and tax will increase 1 percent to 3 percent in the year ending June 2015, the world’s second-biggest distiller said in a statement today.

“We cannot help but feel a little disappointed,” said Jonathan Fyfe, an analyst at Mirabaud Securities. He estimated full-year growth would be 3 percent and said the market consensus was 4.1 percent.

China’s crackdown on extravagant spending has affected Pernod, French cognac maker Remy Cointreau SA and British distiller Diageo Plc. Last week Diageo said sales across Asia fell 7.4 percent, hurt by a 20 percent decline in mainland China. Sales of Remy Martin cognac fell 12 percent in the most recent quarter. Pernod, which cut its profit forecast midway through its last fiscal year, gets about 10 percent of its revenue from China.

Revenue from that market fell 9 percent in the first quarter, though shipments rose 4 percent. The company said the second quarter will be negatively affected by a later Chinese new year festival, which takes place in February next year as opposed to January in 2014. That will shift sales for that period into the third quarter.

India, China

The stock traded 1.5 percent lower at 85.17 euros as of 9:13 a.m. in Paris.

The maker of Absolut vodka and Royal Salute whisky reported organic sales that increased 2 percent in its first quarter ended Sept. 30. That beat the 1.6 percent median estimate of 13 analysts.

Revenue rose 4 percent in the Asia-Rest of World region on an organic basis, the first increase in more than a year.

“The main message is that we return to growth during this quarter,” Chief Executive Officer Pierre Pringuet said in a phone interview. He said the India business was “very strong” and Pernod is “positive” on the Chinese market, where the company expects gradual improvement.

Pernod, maker of Absolut vodka and Malibu rum, is pushing less expensive liquors such as Ballantine’s whisky in response to lower demand for premium cognac in China. Pringuet is also eliminating about 5 percent of the Paris-based distiller’s workforce as it seeks to deliver 150 million euros ($190 million) of savings through 2017.

“We anticipate a gradual improvement in sales, in an environment that will remain difficult,” Deputy CEO Alexandre Ricard said in the statement. He is slated to take Pringuet’s job next year.