Organic growth and Seagram boost Pernod Ricard results

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Now fully focused on wine and spirits, France's Pernod Ricard group
has announced a strong rise in first half sales and profits, thanks
to good organic growth from brands such as Jacob's Creek, and to
the addition of the various Seagram brands.

A combination of the traditional rise in organic growth and the acquisition of a number of strong international brands from Seagram helped French wine and spirits group Pernod Ricard to lift its first half results.

Consolidated sales, excluding duties and tax, reached €2.6 billion, up 18 per cent from the first half of 2001, while operating profits shot up 63 per cent to €296 million. Net profits for the half were up 47 per cent at €154 million.

With a number of disposals having already taken place, or in the process of being completed, Pernod Ricard is now entirely focused on the spirits and wine business (having at one stage had various food ingredient and distribution businesses, as well as a not insignificant soft drinks unit).

The company will therefore have welcomed the news that this core wine and spirits business lifted its sales during the half to €1.5 billion, up 78 per cent, and its operating profit to €265 million, a 110 per cent increase.

While much of the rise in sales came from the addition of various Seagram brands, notably Chivas Regal and Martell, Pernod also managed to maintain its steady rise in organic growth, as much a feature of the company's business over the last few years as the steady stream of acquisitions and disposals.

Organic growth was a "gratifying" 4.5 per cent during the half to €898 million, with a 15 per cent rise for Jacob's Creek Australian wine, an 11 per cent hike for Havana Club rum and increases of 10 per cent for Amaro Ramazzotti and 5 per cent for Jameson Irish whiskey. Ramazzotti became the group's 15th brand to sell more than a million cases in a year during the last 12 months.

Not all the group's flagship brands performed well, however, with slowing consumption in France, largely due to the gloomy weather in the spring, undermining sales of the anis brands (Ricard and 51) and the Clan Campbell blended Scotch whisky brand.

The Seagram brands - acquired as part of a joint bid for the Canadian firm with Diageo, Pernod's main UK rival - posted sales of €605 million in the half, in line with Pernod's expectations.

The effects of overstocking in some markets meant that first half sales were not as high as might have been hoped, but strong performances from the Chivas, Martell and Seagram's Gin brands in the first two months of the second half leave plenty of room for hope that the full year figures will be more than acceptable.

Pernod said that the Seagram deal had not only helped it to create a number of synergies with its existing business, but that it had also allowed the group to gain a more evenly-spread geographical coverage, with an increase in sales and profits from the Americas, where brands such as Seagram's Gin and Montilla rum are strong, and Asia, where Martell Cognac is a major player.

During the first half, the operating profit of the spirits and wine division outside Europe increased nearly eightfold.

The sale of all the group's non-core business has also helped Pernod Ricard reduce some of the debts which it incurred during the acquisition of the Seagram brands. In the last two years, the group has managed to complete all its planned disposals and generate €1.3 billion as a result, allowing it to pay off the €1 billion bridging loan taken out to finance the Seagram acquisition.

The company is now in an excellent position to consolidate its position as the world's third largest spirits and wine group, and is predicting further growth in the second half as the integration of the Seagram brands continues. Targets for the full year are sales growth of 90 per cent and a twofold increase in operating profits from wine and spirits compared to the previous year.

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