Pernod Ricard Sees Opportunities As Consumers Turn To Drinking At Home
Pernod Ricard has looked to strong spirits sales in Europe and US supermarkets as one bright spot during the coronavirus pandemic after reporting a 77% drop in net profit and a €1 billion write-down.
The owner of Absolut vodka and Martell cognac did not give specific guidance for the year that started on July 1, aside from pointing to the resilient home consumption trends and also predicting sales in China will sequentially improve.
Duty free travel retail, which has been hit hard by restrictions on air travel, makes up 6% of group sales, while Pernod has also been hobbled by lockdown restaurant closures.
Travel retail is expected to stay under pressure this year.
"For FY 2021 Pernod Ricard expects continued uncertainty and volatility, in particular relating to sanitary conditions and their impact on social gatherings, as well as challenging economic conditions," Pernod Ricard chairman and CEO Alexandre Ricard said.
Ricard said that Pernod will invest more in the digital sector, and has identified opportunities thrown up by the pandemic and home alcohol consumption, including internet gatherings.
"New opportunities have arisen thanks to these digital, Zoom or Facebook virtual parties," Ricard told a conference call on the group's results.
Pernod Ricard also unexpectedly wrote off €1 billion in the full financial year 2019/20 ended June 30, which was largely linked to Absolut Vodka and its dependence on travel retail.
Net Profit And Profit From Recurring Operations
Pernod Ricard, which is the world's largest spirits maker after Diageo, reported a 77% fall in net profit to €329 million in the full year and said that profit from recurring operations fell by 13.7% on an organic basis to €2.260 billion during the year that ended on June 30.
This was better than the company's July guidance for a 15% decline, helped by cost cuts and better-than-expected spirits sales to supermarkets in the United States and Europe. That helped cushion a weak performance in Asia and in travel retail.
Sales Fall And China
Over the twelve months to June 30, a sales fall of 9.5% to €8.448 billion euros, reflected notably a 27% fall in global travel retail sales and a 16% fall in China sales.
In China, which contributes 9% of group sales and is the group's second largest market after the United States, trends were improving in the fourth quarter with the gradual reopening of bars and restaurants. Some 90% of bars and restaurants have now reopened in China.