Pernod Ricard Cuts Guidance, Blaming Coronavirus -- Update
February 13 2020 - 4:22AM
Dow Jones News
By Cristina Roca
--Pernod Ricard reported higher 1H net profit and sales but cut
its guidance due to the coronavirus outbreak
--The French spirits company sees its FY20 earnings growing
slower due to the virus
--Pernod based its new guidance on assumptions that most of
China will start recovering in March, with tourism rebounding in
April
Pernod Ricard SA on Thursday slashed its full-year guidance, and
said that it expects the coronavirus outbreak to have a severe
impact on its fiscal third-quarter, even as it reported higher net
profit and sales for the first half of its fiscal year.
The French spirits maker reported net profit of 1.03 billion
euros ($1.12 billion), up from EUR1.02 billion a year earlier.
Second-quarter sales were EUR2.99 billion, rising 4% on an organic
basis, which strips out currency fluctuations and acquisitions.
Despite the rise in sales and earnings, the maker of Absolut
vodka and Jameson whiskey said it now expects lower organic growth
in its underlying profit as it assumes the coronavirus to have a
"severe" impact on its China and travel-retail business, mainly
during the third quarter. Pernod cut its guidance for organic
growth in profit from recurring operations for fiscal 2020 to
2%-4%, from previous expectations of 5%-7%.
"For the first half of the year, profit from recurring
operations grew organically by 4.3%," Pernod said.
The company expects the coronavirus to hit its sales by 2% in
fiscal 2020, it said.
In China, Pernod expects the on-trade channel--sales of drinks
in hotels, restaurants, bars etc.--to start gradually recovering in
March and to return to normality by June, except in the Hubei
province, where recovery is expected to be slower. The Chinese
off-trade channel should recover in March, the company said.
Pernod assumes Chinese passenger numbers will drop by about 2/3
during the months of February and March, hitting its travel-retail
business in Asia. Pernod assumes Chinese tourist numbers will
gradually recover starting in April and be back to normal by June,
it said.
The "Asia-Rest of the World" region--excluding Europe and the
Americas--accounted for 44% of Pernod's first-half sales, making it
its biggest market.
According to Citi analysts, the big question is now whether
Pernod's assessment of the duration of disruption from the virus is
bearish enough.
"We will stay the strategic course and maintain priority
investments in order to continue maximising long-term value
creation," Chairman and Chief Executive Alexandre Ricard said.
Write to Cristina Roca at cristina.roca@dowjones.com;
@_cristinaroca
(END) Dow Jones Newswires
February 13, 2020 04:07 ET (09:07 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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