Absolut Vodka Maker Pernod Ricard Expects Challenges in U.S., China to Persist — Update

By Andrea Figueras

French distiller Pernod Ricard anticipated a soft first quarter after it posted declining sales and earnings for the last fiscal year, citing a challenging environment in China and further inventory destocking in the U.S.

The company--which houses brands such as Absolut vodka and Ballantine's whisky--said Thursday that it expects sales to return to growth in fiscal 2025, but the first three months would be sluggish.

For the year ended in June, the company booked sales of 11.6 billion euros ($12.90 billion), down 4% in reported terms from a year earlier. That was in line with analysts' expectations of 11.62 billion euros, according to a FactSet poll.

In the fourth quarter alone, sales grew 1% to 2.66 billion euros.

Chief Executive Alexandre Ricard said the environment has been marked by economic and geopolitical uncertainty, as well as the normalization of the spirits market after two years of exceptional growth.

Like Pernod Ricard, other spirits companies are also facing tough business conditions, particularly in China and the U.S. After the postpandemic boom in beverage consumption, sales growth returned to more normalized levels, leading to an increase in stocks, particularly in the U.S.

In China, spirits makers have been grappling with a complex environment marked by soft consumer sentiment. On top of that, the Chinese government launched an anti-dumping probe on brandy imported from the European Union in January, raising concerns among investors about the potential hit to spirits brands.

Pernod Ricard's profit from recurring operations decreased 7% on year to 3.12 billion euros in the fiscal year, while net profit dropped to 1.48 billion euros, compared with 2.26 billion euros in the year-ago period.

The company confirmed its midterm financial goals. It expects to reach the upper end of its target range of between 4% and 7% growth in net sales, as well as organic operating leverage of 50 to 60 basis points.

The company proposed a dividend of 4.70 euros a share, unchanged from the previous fiscal year.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

August 29, 2024 03:09 ET (07:09 GMT)

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