Diageo, which owns the Johnnie Walker brand, is better placed for the global spirits market, Moodys said

Diageo, which owns the Johnnie Walker brand, is better placed for the global spirits market, Moody's said

Ratings firm Moody's has handed Diageo victory in a credit run-off against spirits rival Pernod Ricard.

A new Moody's report released this week said Diageo's lower leverage and larger size gives it a stronger credit quality and a higher rating than French peer Pernod. Strong momentum in the US was also a boost for Diageo, while "Pernod's growth remains constrained by China", Moody's said.

The report continued: "Pernod will be able to partially compensate for the soft trading conditions in China with strong growth in India, but this market has lower profitability than the group average. As a result, Moody's expects low single-digit organic profit growth for Pernod [over the next 12-18 months], whereas Diageo's organic profit will grow in line with the broader industry range of 4% to 5%."

Both companies have been hit by global volatility this year. In FY results this year, Pernod posted weak sales growth while currency fluctuations dragged down Diageo's. However, Diageo's performance has improved greatly over the past two years, with investors once again backing the Guinness owner in the stock market.

Despite Moody's praise for Diageo, the ratings firm said Pernod maintains the edge in the faster-growing premium spirits category. Looking forward, however, it said both companies should benefit from strong global demand for Western brown spirits.

It added: "Pernod will benefit the most because brown spirits represent a greater share of its revenues and volumes than for Diageo and because of its established presence in the Cognac business."

The report also said Diageo is "slightly more exposed" to Brexit.

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