Pernod Sees Higher Full-Year Profit as Sales Beat Estimates

  • Earnings from recurring operations forecast to rise 1% to 3%
  • Outlook compares with analyst consensus for growth of 2.8%
Photographer: Chris Ratcliffe/Bloomberg

Pernod Ricard SA forecast higher full-year earnings as U.S. sales growth outweighs weakness in China, a market that the world’s second-biggest distiller says will remain difficult.

Earnings from recurring operations will increase 1 percent to 3 percent in the year ending June 2016 on an adjusted basis, the Paris-based company said in a statement Thursday. That compares with analysts’ estimates for 2.8 percent growth and last year’s rate of 2 percent. Pernod also reported first-quarter sales growth that beat analysts’ estimates.

“The world is looking a bit better now, especially in Europe and the U.S.” Ian Shackleton, an analyst at Nomura, said by phone, calling the forecast cautious. “Expectations were pulled back in China, where the message at the moment is to assume it will be down this year.”

The maker of Beefeater gin and Chivas Regal scotch is doubling distribution of luxury variants such as Absolut Elyx vodka to reignite growth in the U.S., Chief Financial Officer Gilles Bogaert said by phone. Sales of Pernod’s Martell and Noblige cognac brands have suffered from a crackdown on lavish spending in China. It’s also eyeing opportunities for its Havana Club Cuban rum in the U.S. as tensions thaw between the two countries.

The shares rose 3 percent to 101.45 euros as of 11:31 a.m. in Paris. Pernod shares have risen 17 percent in the past year, trailing the 20 percent increase for the European food and beverage sector.

First-quarter sales increased 3 percent on an organic basis to 2.22 billion euros ($2.5 billion). Analysts expected 1.1 percent growth, according to the median of 18 estimates. Sales in the Americas rose 6 percent. Revenue from China dropped 9 percent, while the market declined at a pace of 4 percent to 5 percent.

That contrasts with Remy Cointreau SA and LVMH Moet Hennessy Louis Vuitton SE, which have both reported improvement in China, where Pernod gets 9 percent of its sales.

“We don’t see any improvement in the underlying trends in China for this year,” CFO Bogaert said.

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