just On Call - Pernod Ricard defends Europe, as Asia blossoms

Pernod Ricard's CEO, Pierre Pringuet, has said that Europe remains a "bastion" for the group, despite seeing growth increasingly driven by so-called emerging markets.

Pernod Ricard said today (16 February) that half-year net sales in Western Europe fell by 2%, excluding France, where the firm gained from distributor stockpiling ahead of a rise in excise tax. Similar to Diageo last week, conditions for Pernod in much of Western and Southern Europe contrasted markedly with emerging markets, and also with improving trends in the US, in the six month-period.

However, when questioned by analysts on a conference call today, Pringuet defended Europe, and the troubled Spain market in particular. "Western Europe is a sort of bastion," he said. "It is highly profitable and Spain [too] is a highly profitable market. Of course, we make savings but we don't want to disarm this market."

He added: "We will be pragmatic in a subdued environment." He said that Pernod is in crisis-hit Spain, Greece and Italy for the long-term. 

For the six months to the end of December, Pernod's global net sales reached EUR4.6bn (US$6bn). Emerging markets across Asia continued to drive growth, with Jameson also leading a 5% increase in organic net sales in the US. As well as the buy-in in France, sales were inflated by extra demand for premium Cognac ahead of Chinese New Year.

Analysts reacted largely positively to the results. Sanford Bernstein analysts said in a note: "We note that organic results were better than Diageo at the top and bottom-line."

They added: "Going forward, we still believe Pernod has a better edge on top-line growth due to higher exposure to fast growing Chinese cognac and relative outperformance in the US. On top, Pernod has less exposure than Diageo to the worst market in Europe, Greece." 

Following the results, Pernod raised its full-year forecast for growth in organic profits from recurring operations "close to 8%". This is up two percentage points from guidance given after the first quarter.

Pernod translated its sales performance in to a 14% increase in operating profits from recurring operations, to EUR1.38bn. Net sales increased by 20% to EUR820m.