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Pernod Ricard — Earnings Release 2013
Feb 13, 2014
1591_iss_2014-02-13_70f081f5-b612-46d0-9a62-f0c771b1cc64.pdf
Earnings Release
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Paris, 13 February 2014
Sales virtually stable and slight increase in PRO1 in HY1 (excluding forex impact and Group structure)
New guidance for FY 2013/14: Organic growth in PRO between +1% and +3%
Net sales for the first semester of 2013/14 totalled € 4,570 million. Excluding forex impact and Group structure sales were virtually stable, reflecting an improvement in the second quarter (+2%) over the first (-1%). Due to a highly unfavourable forex impact, reported net sales growth was -7%.
Sales were mainly impacted by one market, China (-18%):
- Asia-RoW excluding China +2%
- very good performance in Europe (+4%)
- return to growth in Americas (+3%) following a strong second quarter
Top 14 was virtually stable despite a mix effect of -4% (decline of Martell in China). Volumes were stable and pricing remained positive. The second quarter showed a return to growth. Key local brands performed well (+4%) despite the decline (primarily technical) of Imperial.
Operating margin improved (+34bps), thanks to strict control of resources, leading to organic growth in Profit from Recurring Operations of +2% at € 1,359 million.
As announced, the highly unfavourable forex impact (€ -112 million on PRO at end December) affected the reported growth in Profit from Recurring Operations (-7%).
Financial expenses on recurring operations were reduced by -19% thanks to a significant reduction in the cost of debt to 4.6% (vs. 5.4% in HY1 2012/13).
Net profit from recurring operations declined -3%. Excluding forex impact, it grew +6%.
At end December, debt was reduced € -102 million to € 8.6 billion.
1 Profit from recurring operations
This announcement provided Pierre Pringuet, Chief Executive Officer of Pernod Ricard, with the opportunity to state: "We remain confident in the medium and long-term potential of China but we anticipate difficulties to persist for the full financial year. We want to prioritize the Group's future sales growth through a sound commercial policy and an appropriate level of investment. As a result, we are issuing new guidance for FY 2013/14: organic growth in profit from recurring operations between +1% and +3%."
Pierre Pringuet also announces the launch of Allegro, a project aimed at delivering further operational efficiency: "We want to improve organisational efficiency in order to generate future growth, seize new opportunities (particularly innovation and digital) and increase the speed of execution. We will continue to rely on our decentralised model, based on the direct relationship between Brand Companies and Market Companies."
From a financial standpoint, this project will generate € 150 million of annual savings over three years. They will be partly reinvested to support brand development.
A detailed presentation of sales for the first semester of 2013/14 can be downloaded from our website: www.pernod-ricard.com
Limited audit procedures have been carried out on the half-year financial statements. Half-year financial report related to this press release is being prepared and will be available on our website www.pernod-ricard.com.
Note: All growth data specified in this press release refers to organic growth, unless otherwise stated. France is now included in the Europe operating segment.
About Pernod Ricard
Pernod Ricard is the world's co-leader in wines and spirits with consolidated sales of € 8,575 million in 2012/13. Created in 1975 by the merger of Ricard and Pernod, the Group has undergone sustained development, based on both organic growth and acquisitions: Seagram (2001), Allied Domecq (2005) and Vin & Sprit (2008). Pernod Ricard holds one of the most prestigious brand portfolios in the sector: Absolut Vodka, Ricard pastis, Ballantine's, Chivas Regal, Royal Salute and The Glenlivet Scotch whiskies, Jameson Irish whiskey, Martell cognac, Havana Club rum, Beefeater gin, Kahlúa and Malibu liqueurs, Mumm and Perrier-Jouët champagnes, as well Jacob's Creek, Brancott Estate, Campo Viejo and Graffigna wines. Pernod Ricard employs a workforce of nearly 19,000 people and operates through a decentralised organisation, with 6 "Brand Companies" and 80 "Market Companies" established in each key market. Pernod Ricard is strongly committed to a sustainable development policy and encourages responsible consumption. Pernod Ricard's strategy and ambition are based on 3 key values that guide its expansion: entrepreneurial spirit, mutual trust and a strong sense of ethics.
Pernod Ricard is listed on the NYSE Euronext exchange (Ticker: RI; ISIN code: FR0000120693) and is a member of the CAC 40 index.
Pernod Ricard Contacts
| Jean Touboul / Financial Communication – Investor Relations VP | +33 (0)1 41 00 41 71 |
|---|---|
| Sylvie Machenaud / Director External Communications | +33 (0)1 41 00 42 74 |
| Alison Donohoe / Investor Relations | +33 (0)1 41 00 42 14 |
| Carina Alfonso Martin / Press Relations Manager | +33 (0)1 41 00 43 42 |
Appendices
Sales analysis by region (new operating segments)
| Net Sales (€ millions) |
Q1 2012/13 | Q1 2013/14 | Change | Organic Growth Group Structure | Forex impact | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Europe | 674 | 30.6% | 666 | 33.1% | (7) | -1% | 21 | 3% | (15) | -2% | (13) | -2% |
| Americas | 579 | 26.3% | 532 | 26.4% | (47) | -8% | 2 | 0% | (1) | 0% | (48) | -8% |
| Asia / Rest of the World | 951 | 43.2% | 814 | 40.5% | (137) | -14% | (55) | -6% | (7) | -1% | (74) | -8% |
| World | 2,203 100.0% | 2,013 100.0% | (191) | -9% | (32) | -1% | (22) | -1% | (136) | -6% |
| Net Sales (€ millions) |
Q2 2012/13 | Q2 2013/14 | Change | Organic Growth Group Structure | Forex impact | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Europe | 946 | 35.0% | 946 | 37.0% | 0 | 0% | 38 | 4% | (19) | -2% | (19) | -2% |
| Americas | 703 | 26.0% | 677 | 26.5% | (26) | -4% | 39 | 6% | (1) | 0% | (63) | -9% |
| Asia / Rest of the World | 1,054 | 39.0% | 934 | 36.5% | (120) | -11% | (27) | -3% | (5) | -1% | (87) | -8% |
| World | 2,703 100.0% | 2,558 100.0% | (145) | -5% | 5 0 |
2 % |
(25) | -1% | (170) | -6% | ||
| Forex impact | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 1,619 | 33.0% | 1,612 | 35.3% | (7) | 0% | 59 | 4% | (33) | -2% | (33) | -2% |
| 1,282 | 26.1% | 1,209 | 26.5% | (73) | -6% | 41 | 3% | (2) | 0% | (112) | -9% |
| 2,005 | 40.9% | 1,749 | 38.3% | (256) | -13% | (82) | -4% | (12) | -1% | (162) | -8% |
| (336) | 1 8 |
0 % |
(48) | -1% | (306) | -6% | |||||
| HY1 2012/13 4,907 100.0% |
HY1 2013/14 4,570 100.0% |
Change -7% |
Organic Growth Group Structure |
NB: France is now included in the Europe operating segment
Sales analysis by region (former operating segments)
| Net Sales (€ millions) |
Q1 2012/13 | Q1 2013/14 | Change | Organic Growth Group Structure | Forex impact | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| France | 149 | 6.8% | 156 | 7.8% | 7 | 5% | 7 | 5% | (0) | 0% | 0 | 0% |
| Europe excl. France | 524 | 23.8% | 510 | 25.3% | (14) | -3% | 13 | 3% | (14) | -3% | (13) | -3% |
| Americas | 579 | 26.3% | 532 | 26.4% | (47) | -8% | 2 | 0% | (1) | 0% | (48) | -8% |
| Asia / Rest of World | 951 | 43.2% | 814 | 40.5% | (137) | -14% | (55) | -6% | (7) | -1% | (74) | -8% |
| World | 2,203 100.0% | 2,013 100.0% | (191) | -9% | (32) | -1% | (22) | -1% | (136) | -6% |
| Net Sales (€ millions) |
Q2 2012/13 | Q2 2013/14 | Change | Organic Growth Group Structure | Forex impact | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| France | 225 | 8.3% | 241 | 9.4% | 16 | 7% | 17 | 7% | (1) | 0% | 0 | 0% |
| Europe excl. France | 721 | 26.7% | 705 | 27.6% | (16) | -2% | 22 | 3% | (18) | -3% | (19) | -3% |
| Americas | 703 | 26.0% | 677 | 26.5% | (26) | -4% | 39 | 6% | (1) | 0% | (63) | -9% |
| Asia / Rest of World | 1,054 | 39.0% | 934 | 36.5% | (120) | -11% | (27) | -3% | (5) | -1% | (87) | -8% |
| World | 2,703 100.0% | 2,558 100.0% | (145) | -5% | 5 0 |
2 % |
(25) | -1% | (170) | -6% | ||
| Forex impact | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 374 | 7.6% | 397 | 8.7% | 23 | 6% | 24 | 6% | (1) | 0% | 0 | 0% |
| 1,245 | 25.4% | 1,215 | 26.6% | (30) | -2% | 35 | 3% | (32) | -3% | (33) | -3% |
| 1,282 | 26.1% | 1,209 | 26.5% | (73) | -6% | 41 | 3% | (2) | 0% | (112) | -9% |
| 2,005 | 40.9% | 1,749 | 38.3% | (256) | -13% | (82) | -4% | (12) | -1% | (162) | -8% |
| (336) | 1 8 |
0 | (48) | -1% | (306) | -6% | |||||
| HY1 2012/13 | 4,907 100.0% | HY1 2013/14 4,570 100.0% |
Change -7% |
% | Organic Growth Group Structure |
Top 14 brands organic sales growth
| Top 14 | Net Sales * | Volumes | Price/mix |
|---|---|---|---|
| Absolut | $1\%$ | $-3%$ | 4% |
| Chivas Regal | $-4%$ | $-8%$ | 4% |
| Ballantine's | $-4%$ | 2% | $-6\%$ |
| Ricard | 9% | 8% | $1\%$ |
| Jameson | 16% | 13% | 3% |
| Havana Club | 4% | 2% | 3% |
| Malibu | $-3%$ | $-4%$ | $1\%$ |
| Beefeater | 3% | 4% | $-1\%$ |
| Kahlua | $-1\%$ | $-1\%$ | 0% |
| Martell | $-8%$ | $-8%$ | $-1\%$ |
| The Glenlivet | 10% | $1\%$ | 9% |
| Royal Salute | $-11%$ | $-10%$ | $-1\%$ |
| Mumm | $-1\%$ | $-2%$ | $1\%$ |
| Perrier-Jouët | 9% | 0% | 9% |
| Top 14 | $-1\%$ | 0% | $-1\%$ |
Profit from recurring operations by region (new operating segments)
World
| (€ millions) | HY1 2012/13 | HY1 2013/14 | Change | Organic Growth Group Structure | Forex impact | |
|---|---|---|---|---|---|---|
| Net sales (Excl. T&D) | 4,907 100.0% | 4,570 100.0% | (336) -7% |
18 0% |
(48) -1% |
(306) -6% |
| Gross margin after logistics costs | 3,096 63.1% | 2,909 63.6% | (188) -6% |
21 1% |
(12) 0% |
(197) -6% |
| Advertising & promotion | (888) 18.1% |
(821) 18.0% |
67 -8% |
21 -2% |
2 0% |
45 -5% |
| Contribution after A&P | 2,208 45.0% | 2,088 45.7% | (120) -5% |
42 2% |
(10) 0% |
(152) -7% |
| Profit from recurring operations | 1,459 29.7% | 1,359 29.7% | (100) -7% |
2 2 2 % |
(10) -1% |
(112) -8% |
Asia / Rest of the World
| (€ millions) | HY1 2012/13 | HY1 2013/14 | Change | Organic Growth Group Structure | Forex impact | |
|---|---|---|---|---|---|---|
| Net sales (Excl. T&D) | 2,005 100.0% | 1,749 100.0% | (256) -13% |
(82) -4% |
(12) -1% |
(162) -8% |
| Gross margin after logistics costs | 1,262 62.9% | 1,089 62.3% | (173) -14% |
(63) -5% |
0 0% |
(110) -9% |
| Advertising & promotion | (359) 17.9% |
(298) 17.1% |
61 -17% |
39 -11% |
0 0% |
22 -6% |
| Contribution after A&P | 903 45.0% | 791 45.2% | (112) -12% |
(25) -3% |
0 0% |
(88) -10% |
| Profit from recurring operations | 674 33.6% | 584 33.4% | (90) -13% |
(24) -4% |
1 0 % |
(67) -10% |
| Americas |
Americas
| HY1 2012/13 | HY1 2013/14 | Change | Organic Growth | Group Structure | Forex impact | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1,282 100.0% | 1,209 100.0% | (73) | -6% | 41 | 3% | (2) | 0% | (112) | -9% | |||
| 831 64.8% | 794 65.7% | (37) | -4% | 39 | 5% | (1) | 0% | (75) | -9% | |||
| (243) | 18.9% | (231) | 19.1% | 12 | -5% | (6) | 2% | 0 | 0% | 17 | -7% | |
| 589 45.9% | 563 46.6% | (25) | -4% | 33 | 6% | 0% | (58) | -10% | ||||
| 378 29.5% | 356 29.4% | (22) | -6% | 1 9 |
5 % |
0 | (40) | -10% | ||||
| (1) (1) |
% |
Europe
| HY1 2012/13 | HY1 2013/14 | Change | Forex impact | ||
|---|---|---|---|---|---|
| 1,619 100.0% | 1,612 100.0% | (7) | 59 | (33) -2% |
(33) -2% |
| 1,003 61.9% | 1,025 63.6% | 23 | 45 | (11) -1% |
(11) -1% |
| (286) 17.7% |
(292) 18.1% |
(5) | (12) | 1 0% |
5 -2% |
| 716 44.2% | 734 45.5% | 17 | 33 | (10) -1% |
(6) -1% |
| 407 25.1% | 419 26.0% | 1 2 3 |
2 7 7 |
(10) -2% |
(5) -1% |
| 0% 2% 2% 2% |
% | Organic Growth Group Structure 4% 5% 4% 5% % |
NB: France is now included in the Europe operating segment
Profit from recurring operations by region (former operating segments)
Europe excluding France
| 1,215 100.0% | (30) | -2% | 35 | 3% | (32) | -3% | ||
|---|---|---|---|---|---|---|---|---|
| (33) | -3% | |||||||
| 743 61.1% | (1) | 0% | 27 | 4% | (11) | -1% | (16) | -2% |
| (191) 15.7% |
2 | -1% | (4) | 2% | 1 | -1% | 5 | -3% |
| 552 45.4% | 1 | 0% | 22 | 4% | (10) | -2% | (11) | -2% |
| 320 26.3% | (6) | 1 2 |
4 | (10) | (9) | -3% | ||
| -2% | % | -3% |
France
| HY1 2012/13 | HY1 2013/14 | Change | Forex impact | ||
|---|---|---|---|---|---|
| 374 100.0% | 397 100.0% | 23 | 24 | (1) 0% |
0 0% |
| 259 69.4% | 283 71.2% | 23 | 18 | 0 0% |
5 2% |
| (93) 25.0% |
(101) 25.4% |
(7) | (7) | 0 0% |
0 0% |
| 166 44.4% | 182 45.8% | 16 | 11 | 0 0% |
5 3% |
| 8 0 21.5% |
9 9 25.0% |
1 9 |
1 5 |
0 0 % |
3 4 % |
| 6% 9% 8% 10% 23% |
Organic Growth Group Structure 6% 7% 8% 6% 18% |
Foreign exchange impact
| Forex impact HY1 2013/14 (€ millions) |
Average rates evolution | On Net | On Profit from |
|||
|---|---|---|---|---|---|---|
| 2012/13 | 2013/14 | % | Sales | Recurring Operations |
||
| US dollar | USD | 1.27 | 1.34 | 5.4% | (54) | (35) |
| Indian rupee | INR | 69.63 | 83.44 | 19.8% | (55) | (22) |
| Japanese yen | JPY | 101.88 | 133.85 | 31.4% | (21) | (12) |
| Russian rouble | RUB | 40.15 | 43.89 | 9.3% | (15) | (11) |
| Venezuelan bolivar | VEF | 10.83 | 16.79 | 54.9% | (16) | (11) |
| Chinese yuan | CNY | 8.03 | 8.20 | 2.2% | (11) | (8) |
| Currency translation variance / FX hedging | (3) | |||||
| Other currencies | (134) | (10) | ||||
| Total | (306) | (112) |
Foreign exchange estimated impact FY 2013/14 (profit from recurring operations)
Over the full 2013/14 financial year, the forex impact on profit from recurring operations is estimated at approximately € (170) million, based on average foreign exchange rates for the full financial year, projected on 7 February 2014, in particular EUR/USD = 1.35.
Group structure effect
| Group structure HY1 2013/14 (€ millions) |
On Net Sales | On Profit from Recurring Operations |
|---|---|---|
| Scandinavian activities | (22) | (10) |
| Spanish activities | (11) | 1 |
| Australian activities | (6) | 2 |
| Other | (9) | (2) |
| Total Group Structure | (48) | (10) |
Summary consolidated income statement
| (€ millions) | 31/12/2012 (*) | 31/12/2013 | Change |
|---|---|---|---|
| Net sales | 4,907 | 4,570 | -7% |
| Gross Margin after logistics costs | 3,096 | 2,909 | -6% |
| A&P expenditure | (888) | (821) | -8% |
| Contribution after A&P expenditure | 2,208 | 2,088 | -5% |
| Structure costs | (749) | (729) | -3% |
| Profit from recurring operations | 1,459 | 1,359 | -7% |
| Financial income/(expense) from recurring operations | (280) | (227) | -19% |
| Corporate income tax on items from recurring operations | (317) | (295) | -7% |
| Net profit from discontinued operations, non-controlling interests and share of net income from associates |
(11) | (11) | 0 % |
| Group share of net profit from recurring operations | 852 | 826 | -3% |
| Other operating income & expenses | (95) | (20) | NA |
| Non-recurring financial items | (0) | 2 | NA |
| Corporate income tax on items from non recurring operations | 8 9 |
2 0 |
NA |
| Group share of net profit | 846 | 828 | -2% |
| Non-controlling interests | 1 1 |
1 1 |
-1% |
| Net profit | 857 | 839 | -2% |
(*) Data published with respect to fiscal year 2012/2013 has been adjusted following the application of amended IAS 19 (Employee Benefits), adopted in the European Union and whose application is mandatory for the Group from 1 July 2013 with retrospective effect as from 1 July 2012
Balance sheet (assets)
| Assets (€ millions) |
30/06/2013 (*) | 31/12/2013 |
|---|---|---|
| (Net book value) | ||
| Non-current assets | ||
| Intangible assets and goodwill | 16,753 | 16,291 |
| Tangible assets and other assets | 2,506 | 2,605 |
| Deferred tax assets | 1,771 | 1,729 |
| Total non-current assets | 21,030 | 20,625 |
| Current assets | ||
| Inventories | 4,484 | 4,568 |
| of which aged work-in-progress | 3,617 | 3,706 |
| of which non-aged work-in-progress | 69 | 65 |
| Receivables (**) | 1,159 | 1,695 |
| Trade receivables | 1,090 | 1,624 |
| Other trade receivables | 69 | 71 |
| Other current assets | 209 | 198 |
| Other current assets | 203 | 192 |
| Tangible/intangible current assets | 6 | 6 |
| Tax receivable | 27 | 39 |
| Cash and cash equivalents and current derivatives | 620 | 688 |
| Total current assets | 6,499 | 7,188 |
| Assets held for sale | 8 | 4 |
| Total assets | 27,537 | 27,817 |
(**) after disposals of receivables of: 505 684
(*) Data published with respect to fiscal year 2012/2013 has been adjusted following the application of amended IAS 19 (Employee Benefits), adopted in the European Union and whose application is mandatory for the Group from 1 July 2013 with retrospective effect as from 1 July 2012
Balance sheet (liabilities and shareholders' equity)
| Liabilities and shareholders' equity (€ millions) |
30/06/2013 (*) | 31/12/2013 |
|---|---|---|
| Group Shareholders' equity | 11,014 | 11,467 |
| Non-controlling interests | 165 | 162 |
| of which profit attributable to non-controlling interests | 9 1 |
1 1 |
| Total Shareholders' equity | 11,179 | 11,629 |
| Non-current provisions and deferred tax liabilities | 4,076 | 4,069 |
| Bonds | 6,949 | 6,731 |
| Non-current financial liabilities and derivative instruments | 915 | 1,441 |
| Total non-current liabilities | 11,940 | 12,241 |
| Current provisions | 163 | 153 |
| Operating payables | 1,546 | 1,572 |
| Other operating payables | 924 | 765 |
| which other operating payables | 635 | 723 |
| Tangible/intangible current payables | 288 | 41 |
| Tax payable | 127 | 167 |
| Bonds | 1,001 | 525 |
| Current financial liabilities and derivatives | 656 | 765 |
| Total current liabilities | 4,418 | 3,947 |
| Liabilities held for sale | 0 | 0 |
| Total current liabilities | 27,537 | 27,817 |
(*) Data published with respect to fiscal year 2012/2013 has been adjusted following the application of amended IAS 19 (Employee Benefits), adopted in the European Union and whose application is mandatory for the Group from 1 July 2013 with retrospective effect as from 1 July 2012