Is Pernod Ricard set to turn a corner in 2014?

Is Pernod Ricard set to turn a corner in 2014?

Is the stage set for Pernod Ricard to return to a healthier level of growth this year? One analyst believes so, although another has forecast that the company still has a way to go.

Pernod will deliver sales and profits results for the first half of its fiscal year 2013-14 on 13 February. After reporting a marked fall in sales in the first quarter, Tony Bucalo from Santander suggests today (6 January) that the company's near-term future should look far rosier, as it cycles weak comparatives in the second quarter.

“We expect a rebound … in 2Q13/14E against an unchallenging 2Q12/13 +1% comparison,” Bucalo says in a note today. “European (flat) and French (-37%) comparatives are particularly easy.”

Along with its French counterpart, Remy Cointreau, Pernod has suffered in China, where the company has benefitted until recently from the country's thirst for international brown spirits. The introduction in late-2012 of a clampdown on inter-governmental gift-giving and banquets hit the bottom lines for both firms throughout 2013.

“We think Pernod is getting ready to turn the corner,” Bucalo continues. “The combination of gifting rule changes in China and weakening currencies have not been kind to the share price in recent months. However, we think management’s medium-term guidance targets are solid and the worst of the bad news cycle is behind us.

“We expect a slow recovery in China beginning in calendar 2014.”

Bucalo's opinion conflicts with that held by Nomura's Ian Shackleton. Last year, Shackleton forecast that Pernod's profits growth would be hampered until full-year 2015 by its troubles in China and a dearth of likely acquisitions.

In just over five weeks' time, we'll see which of them was right.