February 16, 2009
just-drinks.com editor's weekly highlights
The period from 2006 to 2008 has been a relatively quiet one for the Champagne industry. But the peace has not lasted long.
At first glance, Pernod appears to have done a better job at reassuring investors. Its share price rose by 6% on Friday (13 February) after the company announced a 5% organic increase in net sales. Diageo, which announced a corresponding 3% sales rise a day earlier, saw its share price drop after the firm lowered its guidance for full-year organic operating profit guidance and warned that it may cut jobs as part of a cost savings programme.
Pernod, too, lowered its full-year operating profit guidance, from an expected 8% to a range of between 5% and 8%. Diageo's revised guidance was more marked, down to a range of 4%-6%, compared to 7%-9% previously.
Both firms have different focuses for the remainder of the year and into fiscal 2010. Pernod, following its acquisition of Vin & Sprit last year, is very much oriented towards trimming its net debt. Diageo, meanwhile, which has maintained a strong cash flow, remains in the market for further acquisitions, should the right opportunity arise.
As far as the health of the drinks markets goes, both firms' results indicate that, while a slowdown has occurred across key European and North American markets, things could be a lot worse.
Speaking of Diageo and acquisitions, rumours of the potential for a purchase of a stake in India's United Spirits continue to rumble on. This speculation, fuelled very much by comments reportedly coming out of United Spirits' parent company, The UB Group, prompted Diageo's CEO to bring the talks between the two into some sort of perspective. The negotiations remain "very preliminary", Paul Walsh said last week.
Elsewhere last week, we were served with a timely reminder that the man-made mess of the economy has some pretty stiff competition from acts of God – or, allegedly, an arsonist by the name of Brendan Sokaluk - for headlines.
Australia, our thoughts are with you.
Until next time...
Olly Wehring, Managing Editor
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