Pernods Q3 garnered a positive reaction from analysts

Pernod's Q3 garnered a positive reaction from analysts

Shares in French wine and spirits company Pernod Ricard increased 2.43% to EUR64.52 (US$85.40) yesterday (29 April) as the firm raised its profit guidance on the back of a rebound in third-quarter sales.

The news garnered a positive reaction from the analyst industry as the Chivas Regal and Absolut vodka maker recorded an increase in like-for-like sales for the three months to the end of March of 16% to EUR1.54bn (US$2.05bn).

Sanford Bernstein analyst Trevor Stirling said the results beat both its expectations and its consensus.

“Pernod's 15 strategic brands grew at an impressive 21% during the quarter," Stirling said. "Foreign exchange impact in the quarter was up 2%, in line with [expectations], driven by Euro weakness and strong emerging market currencies.

“Organic growth was 16%, ahead of our expectations and consensus of 10%. This beat versus our estimates was underpinned primarily by better than expected performance in Asia, as well as an improving situation in Russia and the US.”

Pernod recorded sales of EUR601m in Asia and the Rest of the World, which grew 27% organically year-on-year, driven by positive performances in India, China and Vietnam.

Sales in Europe grew 7% organically to reach EUR439m, boosted by a rebound of international brands in Russia, as well as good growth in Sweden, Belgium, and Greece.

In the Americas, sales came in at EUR369m, growing 14% organically, beating Sanford Bernstein’s estimate of 10%.

“We continue to think investors underestimate how geared Pernod is to a worldwide economic recovery,” Erwan Rambourg, an analyst at HSBC said in a note to investors before the results. “Consumers are likely to trade more, notably in bars and restaurants, if the economy recovers.”

Like its peers, Pernod has been hit hard by the economic downturn as consumer spending dropped.

Indeed, in February rival Diageo reported a fall in half-year profits. However, the Guinness brewer did say that a recovery was on the way.

Pernod is clearly of the same mindset as, with a positive third quarter behind it, the firm raised its full-year sales outlook.

The company said it now expects organic growth of around 3% for the full 2009/10 financial year, compared with a previous range of between 1% and 3%. The company also confirmed plans to step up advertising and promotion on its strategic brands and markets.

“In Pernod speak, this is likely to mean 3% to 5%," Evolution Securities analyst Simon Hales told Business Week, who also welcomed the “big beat” in third-quarter sales.

The rebounding performance has enabled Pernod to offset a sluggish start to its fiscal year, and the firm is now optimistic that the industry will see a return to premium purchasing.

CEO Pierre Pringuet told Business Week that a slowdown in business at bars and restaurants in the US last year is now “between stable and slightly negative and that’s a very good sign".

“This tends to prove what we’ve been saying through the crisis: the consumer, whenever they’re in a good mood again, will return to premium brands,” the CEO added.

Evolution Securities analyst Simon Hales believes that the firm’s “strong” results reinforce the view that “Pernod’s continued focus on its premium brands through the economic slowdown is delivering.”