Absolut write-down hits Pernod profits

Pernod Ricard saw reported sales rise by 8% (2% organic) to almost €8.56 billion in the year to the end of June, however its net profits fell by 15% to €880 million, attributed to a €404m write down of its Absolut vodka brand.

Jameson Irish whiskey helped Pernod Ricard to achieve an overall sales rise of 8% in 2014/15.

Releasing its end of year results today, Pernod Ricard described its results as “solid” results, with improving sales in China and strong performance of its whisky brands helping to boost sales.

Of its top 14 priority brands, Jameson Irish whiskey saw the biggest organic sales growth with volumes increasing by 9% to 5.1 million and net sales by 10%. The Glenlivet also achieved significant growth with volumes increasing by 7% to 1.1m nine-litre casks, with net sales rising by 11%.

Mumm Champagne and Perrier-Jouet also put in strong performances with the former increasing net sales by 7% and volumes by 13% to 700,000 nine-litre cases, and the latter by 9% and 11% respectively to 300,000 nine-litre cases.

“Growth was driven by whiskies (continued strong performance of Jameson, The Glenlivet, Ballantine’s and Indian whiskies) and also of Champagnes Mumm and Perrier-Jouët, both in high single digit growth. Martell returned to growth, despite negative mix (China). Absolut was impacted by a challenging USA market but grew outside the USA”, the report noted.

Despite positive sales growth, Pernod Ricard reported a fall in net profits, down 14% year-on-year to €880m, due to a €404m impairment charge on its Absolut vodka brand, which the company said was “driven by lower growth in the US”.

Net sales of Absolut vodka fell by 1% while volumes were flat at 11.2 million nine-litre cases.

In terms of the group’s premium wines portfolio, Campo Viejo was the biggest winner increasing net sales and volumes by 9% to 2.2m nine-litre cases. This growth offset a slide in Jacob’s Creek fortunes, which saw net sales drop by 3% and volumes by 4% to 6m nine-litre cases.

New Zealand’s Brancott Estate increased its net sales slightly by 1% while volumes saw a rise of 6% to 2.2m nine-litre case. Graffigna, Pernod’s Argentine wine brand, saw the biggest slide with net sales plummeting by 22% and in volume by 18% to just 200,000 nine-litre cases.

Taking each of its key markets, Asia / rest of world saw a positive return to growth with net sales up 4% thanks to improving sales in China, which were down 2% compared with 23% the previous year, and “very strong dynamism” in India.

Net sales in the Americas increased by 2%, while Europe was said to be “stable”, despite difficulties in Eastern Europe and within the Travel Retail sector, with sales falling flat.

Alexandre Ricard, chairman and chief executive of Pernod Ricard said: “Our full year results are solid, delivering improving sales and profit from recurring operations in line with guidance. Our strategy has remained consistent and is delivering results.

“For FY15/16, despite a challenging and volatile macroeconomic environment, we aim to continue gradually improving our business performance. We will continue to support priority brands and innovations while focusing on operational excellence.”