Pernod Keeps Profit Outlook; Duffy to Lead North Americaby
Earnings set to increase 1-3% despite challenging environment
Duffy to lead North America division in management reshuffle
Pernod Ricard SA, the world’s second-largest distiller, maintained its full-year forecast for profit growth and put the head of its Absolut vodka brand in charge of its North American business as it seeks to stem a decline in market share in the U.S.
The company’s Americas business will be split, with Paul Duffy, the chairman and chief executive officer of The Absolut Co., running a new Pernod Ricard North America unit that comprises the U.S. and Canada, the company said in a statement Thursday. The Latin American operations that had been part of the Americas unit now will report to Pernod Ricard’s Europe, Middle East and Africa unit, according to the statement.
“It’s pretty straightforward: 90 percent of the Americas region is the U.S. and Canada,” Alexandre Ricard, Pernod Ricard’s chief executive officer, said in an interview. “it was more simple to say, let’s have a North America division.”
Earnings this will increase by 1 percent to 3 percent on an organic basis, Pernod said, reiterating a forecast it made Oct. 22. Pernod reported first-half sales in line with analyst estimates and organic earnings growth of 3 percent. Absolut accounts for more than a third of Pernod’s sales in the U.S. and is losing market share to new entrants such as Tito’s Handmade Vodka and New Amsterdam.
Philippe Dréano, the head of Pernod Ricard Americas, is retiring after 27 years at the company, according to the statement. Anna Malmhake, the chairman and chief executive of Irish Distillers, will replace Duffy at Absolut.
Operating profit excluding some items in the first half ended Dec. 31 rose 6 percent to 1.44 billion euros ($1.63 billion), Pernod said. The median earnings estimate of 20 analysts was 1.47 billion euros.
The half-year results were solid, the CEO said in the statement. The company plans to improve performance in “a still contrasted macroeconomic environment,” he said.
Pernod Ricard fell 2.4 percent to 97.17 euros at 9:05 a.m. in Paris. The stock has lost 8.2 percent in the past year including dividends, compared with a 1 percent gain for the Stoxx 600 Food & Beverage Index.
Volumes of Pernod Ricard’s so-called Top 14 brands were flat in the first-half, as declines in Absolut and Chivas Regal Scotch offset the improved performance of Jameson whiskey and the company’s champagne brands.
“For Chivas, the decline was driven by two markets: China, where the Scotch segment in China is declining by double digits, and U.S. travel retail, where the dollar’s appreciation has had huge impact on our Americas travel retail business,” Ricard said. U.S. travel retail also impacted the performance of Absolut in the first half, he said.
To buoy profits and grow market share, the company is seeking to offer more high-end spirits that can compete in the same price segment as LVMH’s Belvedere vodka and Remy Cointreau’s The Botanist gin. In January, Pernod acquired Monkey 47 gin, adding the first upmarket gin to its spirit collection.
Last month, London-based Diageo -- the world’s largest spirits maker -- reported a 2.4 percent earnings gain for the first half.