Insight: Pernod Ricard focuses on debt, to raise A&P spend
Pernod Ricard plans to cut debt "as quickly as possible" in order for it to take part in the next round of wine and spirits industry consolidation, but will reinvest in advertising and promotion in the new fiscal year.
Pernod CEO Pierre Pringuet today (8 September) ruled out any acquisitions for the company over the next 12 months.
Speaking at the French drinks giant's full-year results conference, he said that the firm will continue to reduce net debt "as quickly as possible".
Pernod has spent most of calendar 2009 attempting to cut net debt accrued following its EUR5.3bn (US$7.58bn) takeover of Absolut vodka owner Vin & Sprit. The group's net debt to ebitda ratio was 5.3 at the end of the most recent fiscal year, to the end of June, against a ratio of more than 6 the year before.
Speculation continues to swirl on the company's EUR1bn disposals plan, which it said was 70% complete, having agreed to sell Tia Maria and Wild Turkey this year.
Several reports have suggested the group may look to sell its portfolio of Spanish wines. The group reported a write-down charge of EUR146m for its fiscal full-year, primarily, it said, related to the value of its Spanish wine business.
However, Pringuet told just-drinks today that the group is not looking to sell off flagship Spanish wine brand, Campo Viejo.
Once net debt has been reduced, Pringuet indicated that the company would be on the lookout for "opportunities" in the drinks sector.
A separate source close to the company told just-drinks that the firm would look make more acquisitions in the future, most likely in wine rather than spirits.
On the current market situation, Pringuet said that Pernod is expecting a sales decline in its first quarter, due to tough comparables with the previous year.
Despite the ongoing tough environment, the group plans to increase advertising and promotion spend, after cuts in the second half of last year helped it to reach organic operating profits growth of 4%.
"We plan to reinvest behind our brands," said Pringuet at the conference. "We want to put it [A&P] back in growth, although the magnitude of it depends on the [economic] environment."
On Absolut vodka, Pernod's prize acquisition of 2008, Pringuet told just-drinks that the group is determined to return the premium vodka brand to growth in the US "as of this year".
"We have strong ambitions for Absolut in the US," he said, when asked whether the brand will rely on markets outside the US for growth, following declines in the US over the last 12 months.
The company is "seeding" Absolut in China, where it intends to build up a premium white spirits category, while the vodka has enjoyed strong growth in several markets over the last year. Off-trade value sales rose 14% in the UK, 48% in Brazil, 15% in Australia and 25% in Germany, for the year to the end of June, Pernod said.
Pernod Ricard's share price has edged up after a set of resilient half-year results, but it all hangs on the next six months....
Pernod Ricard has won a court ruling to protect the image of its Malibu flavoured rum brand, including its signature opaque white bottle, in the US....
Organisers of the London International Wine Fair have said that they remain confident for 2010, despite withdrawals of several high-profile wine companies, including Constellation Brands and E&J Gallo...
- Analysis - Remy's Cognac "dead-cat bounce"
- Comment - How Hand-Made is Tito's Handmade Vodka?
- Heineken to stay "active player" in beer M&A - CFO
- Focus - Pernod Ricard's Q1 sales by brand
- Time for Heineken to make a European break
- Moët Hennessy unveils first Travel Retail outlet
- United Spirits sees Q1 net loss
- Whisky downturn slows Diageo's Scotch spend
- Beam Suntory, Edrington part ways in Travel Retail
- Pernod Ricard sees sales lift in Q1