Pernod Ricard year-end results down thanks to China slump and foreign exchange rates

By Erin Smith

Published: 28 August, 2014

Sales for the 2014 financial year declined by 7% to €7,945 million due to a unfavourable foreign exchange rates and the Chinese market taking a -23% hit according to Pernod Ricard's annual financial report.

The unfavourable foreign exchange rate resulted in close to a €200 million loss which caused an 8% drop in profit from recurring operations.

Pierre Pringuet, chief executive of Pernod Ricard, said: "Despite an environment that was more difficult than anticipated, we have delivered the guidance announced in February, proof of everyone's commitment, which I would like to commend."

Priority premium wines were relatively stable with volumes declining by 1%, but sales remaining flat. The premium wine category in the UK, especially focused on Jacob's Creek and Campo Viejo, helped sales to remain stable. The report cited that the limited Wimbledon Jacob's Creek bottle helped raise brand awareness, while Campo Viejo's Streets of Colour events that were held across the UK werealso hailed as a success.

Despite the drop in profits, operating margins actually had the strongest increase in four years and improved primarily due to a reduction in expense related to debt. Net financial expense from recurring operations improved by €98 million over last year.

The cost savings is part of a larger project that was launched at the 2014 half-year financial update in February. Pringuet announced in February the launch of the Allegro Project, a cost-saving plan targeted at saving €150 million over the next three years.

"We are seriously committed to the Allegro project: this operational efficiency project must enable us to maximise our future growth while generating a hard figure of €150 million of savings," said Pringuet.

The poor performance and unfavourable foreign exchange rate impacts on the financial results did not come as a huge shock to investors as Pringuet had adequately prepared the market at the half yearly results in February for a tough financial future. The stock was trading up 1.48% at €89.36 (RI: FP) per share. The stock did take a hit mid-year and toppled from €84.50 to €79.36 per share earlier in the year.

Pernod Ricard's brand portfolio includes Absolut vodka, Scotch whiskies Ballantine's, Chivas Regal, Royal Salute and The Glenlivet; as well as Irish whiskey Jameson's, Mumm and Perrier-Jouët Champagnes, as well Jacob's Creek, Brancott Estate, Campo Viejo and Graffigna wines.

The firm employs nearly 19,000 people worldwide.

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