French spirits group Pernod Ricard has reported a bigger-than-expected decline in third-quarter sales but said it was confident of delivering a strong performance over the 2022/2023 full year, predicting 'very strong' sales in the fourth quarter.
Pernod, the world's second-biggest spirits group after Diageo, said that it expected consumer demand to recover further in China following the lifting of COVID restrictions.
It also banked on more favourable comparables in the United States and in China, where it planned further price increases.
Finance chief Helene de Tissot told Reuters the group was "very confident" about prospects for demand for its premium Martell cognac in China in the fourth quarter of its fiscal year after a March rebound.
Price increases planned for Martell in China in May would be in a mid-single to high-single digit range, she said.
Organic Growth
The owner of Mumm champagne, Absolut vodka and Martell cognac predicted organic growth of about 10% in group profit from recurring operations in its full financial year ending June 30, with some expansion in operating margin.
"We keep increasing our prices. It gives us confidence we can protect gross margins," Tissot told analysts.
While cost inflation was expected to stay high in the final quarter of the fiscal year, logistics and distribution costs would moderate, she added.
Pernod Ricard reported sales of €2.391 billion ($2.64 billion) in the three months to 31 March - a 2.2% decline on a like-for-like basis, which was below analysts' expectations of 0.5% growth.
By 0936 GMT, Pernod Ricard shares were up 0.23% at 216.70 euros, after falling as much as 3% in early trade.
Third-Quarter Performance
The third-quarter performance reflected high year-ago comparables in the United States and inventory adjustments after soft demand for Martell cognac during the festive season in China.
Martell sales, however, rebounded strongly in March, it said. Group sales for the nine-months reached 9.507 billion euros, a like-for-like rise of 7.6%.
In the key growth market of India where sales rose 15% in the nine months, Pernod Ricard remained "very ambitious for the short and long term" despite the regulatory challenges it faces.
Pernod was "hopeful" it would obtain the renewal of a liquor sale licence in New Delhi, that city authorities had rejected earlier this month.
News by Reuters edited by Donna Ahern, Checkout. For more drinks stories click here. Click subscribe to sign up for the Checkout print edition.
