Pernod Ricard: H1 FY23 Sales and Results

Rhea-AI Summary

Pernod Ricard reported strong financial performance for H1 FY23, with sales reaching €7,116m, reflecting a +12% organic growth. The growth was broad-based across regions: Americas +7%, Asia-RoW +18%, and Europe +6%. Notably, all spirits segments saw double-digit growth, with Strategic International Brands up by +13%. The pricing dynamic remained robust with a +10% increase, and gross margin expanded by +5 bps. Net profit increased by +29% to €1,792m. However, free cash flow decreased by 28% due to higher working capital needs. The company remains optimistic about continued growth in FY23.

Positive

• Sales for H1 FY23 reached €7,116m, +12% organic growth.
• Strong performances across all regions: Americas +7%, Asia-RoW +18%, and Europe +6%.
• Double-digit growth in all spirits segments, with Strategic International Brands up +13%.
• Gross margin increased by +5 bps, supported by strong pricing dynamic (+10%).
• Net profit rose by +29% to €1,792m.
• Positive currency effect expected in FY23.

Negative

• Recurring Free Cash Flow decreased by 28% vs H1 FY22.
• Net debt increased by €1,131m to €9,789m.

Very strong broad-based growth of Sales and PRO¹ in first half

Strong pricing dynamic, maintaining overall volume growth, sustaining margins

+12% organic Sales Growth (+19% reported)

+12% organic growth in PRO (+21% reported)

PARIS--(BUSINESS WIRE)-- Regulatory News:

Pernod Ricard (Paris:RI):

Press release - Paris, 16 February 2022

SALES

Sales for H1 FY23 reached €7,116m and grew +12% organically (+19% reported), with a favourable FX impact of +€355m linked mainly to the strength of US Dollar vs. Euro.

H1 FY23 Organic Sales growth was broad-based across all regions:

• Americas +7%: dynamic growth driven notably by USA with favorable phasing², Brazil and Canada,
• Asia-RoW +18%: excellent growth driven by India, Turkey, Travel Retail and South East Asia recovery. H1 Sales in China reflecting solid Q1 with good Mid Autumn Festival, but soft Q2 partly offset by favorable shipment phasing ahead of Chinese New Year³. Confident outlook for China following lifting of Covid restrictions,
• Europe +6%: very strong performance with Western Europe and Travel Retail.

All spirits segments are growing double-digit:

• Strategic International Brands +13%: strong momentum notably with the Scotch portfolio, Jameson and Absolut,
• Strategic Local Brands +13%: driven by growth of Seagram’s Indian whiskies and Seagram’s Gin,
• Specialty Brands +14%: continued very strong development of Lillet, Italicus, Malfy, Redbreast, Aberlour and Altos,
• Strategic Wines -2%: softness mostly from UK.

Strong broad-based pricing dynamic at +10%, thanks to strong brand equity. Further price increases planned in H2.

Innovations and Prestige are in strong growth, +16% and +10% respectively.

Q2 Sales were €3,808m, with +12% organic growth, accelerating vs. Q1 organic Sales (+11%).

RESULTS

H1 FY23 PRO reached €2,423m, an organic growth of +12%, with broadly stable organic operating leverage (-1 bp):

• Gross margin expanding +5 bps:
  • Strong broad-based pricing dynamic across brands and geographies and focus on operational efficiencies,
  • offsetting high inflation in Costs of Goods.
• A&P growing in line with Net Sales with acceleration expected in H2 to fuel future growth. (Ratio of c. 16% of Net Sales expected for FY23),
• Structure costs +12% to support business dynamics and digital transformation momentum,
• Favorable FX impact on PRO +€139m mainly from US Dollar appreciation vs. Euro.

Group share of Net PRO was €1,743m, +21% reported vs. H1 FY22 and the Group share of Net Profit was €1,792m, +29% reported, mainly reflecting increase in Profit from Recurring Operations.

Very strong Earnings Per Share growth +23%, reflecting growth in PRO, limited increase of recurring financial expenses thanks to active liability management (with average cost of debt of 2.5%) in first half and the accretive impact of share buy-back program.

FREE CASH FLOW AND DEBT

Solid cash generation with Recurring Free Cash Flow at c. €1bn, -28% vs H1 FY22, reflecting higher operating working capital outflows normalizing post covid recovery and increase in CAPEX and strategic inventories to support future growth of aged portfolio.

Net debt increased by €1,131m vs. 30 June 2022 to €9,789m.

The Net Debt/EBITDA ratio at average rate⁴ was 2.6x at 31 December 2022.

OUTLOOK

In a persistently volatile context, Pernod Ricard has reinforced confidence in delivering a strong performance in FY23 driven by our global footprint and the attractiveness of our diversified, premium portfolio :

• Dynamic, broad-based Net Sales growth albeit in a normalising environment
• Continuing focus on revenue growth management and operational efficiencies to offset cost pressure, in high inflationary environment
• A&P ratio at c. 16% of Net Sales and continuing disciplined investments in structure
• Sustaining Operating margin
• Accelerating investments in CAPEX and strategic inventories, thanks to solid cash generation
• Confirming €750m share buy-back for FY23 with a new €300m tranche to be launched imminently
• Positive currency effect expected

Alexandre Ricard, Chairman and Chief Executive Officer, stated,

“Our first half performance was very strong, marked by broad-based and diversified growth across all regions and categories. In addition, particularly strong pricing dynamic illustrates the attractiveness of our portfolio of premium brands and enabled us to sustain margins in an inflationary context.

We will continue to invest behind our brands, our group-wide transformation and S&R strategy, deliver operational efficiencies and prepare for exciting future growth opportunities.

I expect this dynamic growth to continue through FY23 albeit in a normalizing environment, demonstrating the strength of our strategy and the agility, dedication and exceptional engagement of our teams around the world.”

All growth data specified in this press release refers to organic growth (at constant FX and Group structure), unless otherwise stated. Data may be subject to rounding.

A detailed presentation of H1 FY23 Sales and Results can be downloaded from our website: www.pernod-ricard.com

Limited review procedures have been carried out by the Statutory Auditors on the condensed half-yearly consolidated financial statements. The Statutory Auditors’ Review Report on the Half-yearly Financial Information is being issued.

Definitions and reconciliation of non-IFRS measures to IFRS measures

Pernod Ricard’s management process is based on the following non-IFRS measures which are chosen for planning and reporting. The Group’s management believes these measures provide valuable additional information for users of the financial statements in understanding the Group’s performance. These non-IFRS measures should be considered as complementary to the comparable IFRS measures and reported movements therein.

Organic growth

- Organic growth is calculated after excluding the impacts of exchange rate movements, acquisitions and disposals and changes in applicable accounting principles and hyperinflation.

- Exchange rates impact is calculated by translating the current year results at the prior year’s exchange rates.

- For acquisitions in the current year, the post-acquisition results are excluded from the organic movement calculations. For acquisitions in the prior year, post-acquisition results are included in the prior year but are included in the organic movement calculation from the anniversary of the acquisition date in the current year.

- Where a business, brand, brand distribution right or agency agreement was disposed of, or terminated, in the prior year, the Group, in the organic movement calculations, excludes the results for that business from the prior year. For disposals or terminations in the current year, the Group excludes the results for that business from the prior year from the date of the disposal or termination.

- The impact of hyperinflation on Net Sales in Turkey is excluded from P&L organic growth calculations by capping unit price increases to a maximum of +26% per year, equivalent to +100% over 3 years.

- This measure enables to focus on the performance of the business which is common to both years and which represents those measures that local managers are most directly able to influence.

Profit from recurring operations

Profit from recurring operations corresponds to the operating profit excluding other non-current operating income and expenses.

About Pernod Ricard

Pernod Ricard is the No.2 worldwide producer of wines and spirits with consolidated sales amounting to €10,701 million in fiscal year FY22. The Group, which owns 17 of the Top 100 Spirits Brands, holds one of the most prestigious and comprehensive portfolios in the industry with over 240 premium brands distributed across more than 160 markets. Pernod Ricard’s portfolio includes Absolut Vodka, Ricard pastis, Ballantine’s, Chivas Regal, Royal Salute, and The Glenlivet Scotch whiskies, Jameson Irish whiskey, Martell cognac, Havana Club rum, Beefeater gin, Malibu liqueur or Mumm and Perrier-Jouët champagnes. The Group’s mission is to unlock the magic of human connections by bringing “Good Times from a Good Place”, in line with its Sustainability and Responsibility roadmap. Pernod Ricard’s decentralised organisation empowers its 19,480 employees to be on-the-ground ambassadors of its purposeful and inclusive culture of conviviality, bringing people together in meaningful, sustainable and responsible ways to create value over the long term. Executing its strategic plan, Transform & Accelerate, Pernod Ricard now relies on its “Conviviality Platform”, a new growth model based on data and artificial intelligence to meet the ever-changing demand of consumers.

Pernod Ricard is listed on Euronext (Ticker: RI; ISIN Code:FR0000120693) and is part of the CAC 40 and Eurostoxx 50 indices.

¹ PRO: Profit from Recurring Operations

² USA H1 Organic Sales growth +5%, ahead of underlying value depletions +3%

³ Earlier vs. LY

⁴ Based on average EUR/USD rate: 1.05 in calendar year 2022

View source version on businesswire.com: https://www.businesswire.com/news/home/20230215005972/en/

Florence Tresarrieu / Global SVP Investors Relations and Treasury +33 (0) 1 70 93 17 31

Edward Mayle / Investor Relation Director +33 (0) 6 76 85 00 45

Charly Montet / Investor Relation Manager +33 (0) 1 70 93 17 13

Emmanuel Vouin / Head of External Engagement +33 (0) 1 70 93 16 34

Source: Pernod Ricard

FAQ

What were Pernod Ricard's sales figures for H1 FY23?

Pernod Ricard reported sales of €7,116m for H1 FY23.

How much did Pernod Ricard's net profit increase in H1 FY23?

Net profit increased by 29% to €1,792m in H1 FY23.

What is the organic sales growth percentage for Pernod Ricard?

Pernod Ricard achieved a +12% organic sales growth in H1 FY23.

What are the key regions driving Pernod Ricard's sales growth?

Key regions include Asia-RoW with +18%, Americas with +7%, and Europe with +6% growth.

What is the outlook for Pernod Ricard in FY23?

Pernod Ricard is optimistic about strong performance in FY23, despite a normalizing environment.