Pernod Ricard Raises Guidance Amid Gains on China, India

(Bloomberg) -- Pernod Ricard SA, the world’s second-largest distiller, raised its profit forecast for the current fiscal year after Jameson whiskey extended a nine-year streak of sales growth amid a surge in demand for the company’s spirits.

The Paris-based company increased its projection for organic profit from recurring operations by a percentage point, to 5 percent to 7 percent. Still, despite strength in China and India, the shares fell in early trading.

Pernod Ricard’s performance in Asia was slightly weaker than expected in the fourth quarter, Liberum analysts led by Nico von Stackelberg said in a note. The firm maintains a sell rating on Pernod Ricard shares, saying the company has the lowest return on invested capital among its beverage rivals.

In April, the company had said that growth in profit from recurring operations would be at the top end of a previous target of between 4 percent and 6 percent. Earnings rose 6.3 percent on that basis in the 12 months through June, roughly matching analysts’ estimates.

The company’s shares were down as much as 2.5 percent in early Paris trading Wednesday. Pernod Ricard had gained 19 percent in the year through Tuesday.

In fiscal 2019, “in a still uncertain geopolitical and monetary environment, we will continue consistently implementing our strategy,” Chief Executive Officer Alexandre Ricard said in a statement Wednesday.

‘Great’ U.S.

Pernod Ricard expects its revenue in India and China to continue growing strongly this year, and it’s “great” that the U.S. business is once again rising in line with the spirits market, Chief Financial Officer Helene de Tissot said by phone. France and Spain held back performance in Europe, she said.

Based on current estimates, Pernod Ricard doesn’t expect a significant impact from currency movement on sales and profit in the fiscal year ahead, de Tissot said.

The company is committed to “dynamic management” of its brands, including disposals and acquisitions, de Tissot said, but some valuations in the U.S. are “quite high.”

Earlier this year, Ricard made his biggest management reorganization since becoming CEO three years ago, promoting some of the company’s longest-serving executives to take a more holistic focus on the overall portfolio rather than just running individual brands. De Tissot, the company’s former director of strategy and acquisitions, became CFO, replacing Gilles Bogaert, who took on management of Pernod Ricard’s operations in Europe, the Middle East, Africa and Latin America.

The maker of Chivas Regal scotch also proposed a dividend up 17 percent from fiscal 2017, reflecting the company’s accelerating profit growth and reduced debt. The payout of 41 percent of profit is within the range of 37 percent to 50 percent that Ricard had projected, as the company lifts payouts to as much as half of earnings over the next three years.

Pernod Ricard trails only Diageo Plc in revenue among global distillers.

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