Pernod Ricard Posts FY Profit Beat Despite Facing Market Headwinds

By Scott Kanowsky 

Investing.com -- Pernod Ricard (EPA:PERP) reported better-than-expected annual operating profit on Thursday, as sales at the French drinks maker hit a new record high thanks to solid performance in several crucial markets, lower costs, and positive currency effects.

The group posted organic income from recurring operations of €3.02B for the twelve months ending on June 30, an increase of 19% compared to the prior period. Pernod Ricard had forecast a rise of 17% in April, while analysts were estimating an uptick of 18.1%.

The company behind alcohol brands like Absolut vodka and Seagram's gin saw sales climb 17% organically to hit an all-time peak of €10.7B.

Demand was particularly strong in the U.S., China, and India, while the loosening of pandemic restrictions helped spur a 48% surge in travel retail sales. However, Pernod Ricard warned that passenger traffic remained "subdued" in China due to a recent re-tightening of Covid-19 rules in some parts of the country.

Financial expenses were also slashed, while the appreciation of the U.S. dollar and Chinese yuan against the euro boosted earnings by €160M.

Meanwhile, the firm proposed a 32% dividend raise to €4.12 a share and unveiled a fresh buyback program worth between €500M to €750M over the next fiscal year.

Pernod Ricard said the first quarter had started well, as it predicted "dynamic, broad based" net sales growth over the 2023 fiscal year. In a statement, chairman and chief executive officer Alexandre Ricard added that he is "confident" that the firm will deliver on its medium-term financial targets despite headwinds like soaring inflation and geopolitical tensions creating a "challenging and volatile environment."

Analysts at Credit Suisse said Pernod Ricard's forecast-topping results were widely anticipated following similar recent returns from rivals like Diageo (LON:DGE) and Davide Campari Milano SpA (BIT:CPRI). They also flagged that lockdowns in China in particular may impact sales in autumn and weigh on the stock in the near term.

Shares in Pernod Ricard were trading near the flat line after falling slightly in early European trading.