Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pernod Ricard SA (PDRDF, Financial) achieved organic gross margin expansion of 108 basis points and organic operating margin expansion of 80 basis points.
- The company experienced sequential volume recovery in most markets during the second half of the fiscal year.
- Strong performance in mature and emerging markets, excluding the impact of exiting Russia.
- Continued investment in brand desirability and sustainability for long-term growth.
- Positive price mix across the board, benefiting from previous year's price increases.
Negative Points
- Organic net sales were broadly stable at minus 1%, impacted by the exit from Russia.
- Weak performance in the United States and China, with the US market down 9% and China down 10%.
- Reported profit from recurring operations declined by 7% due to negative foreign currency impacts.
- EPS decreased by 13% due to higher financial expenses from recent refinancing at higher rates.
- The company faced a challenging macroeconomic environment in China, impacting consumer demand and sales.
Q & A Highlights
Q: Can you talk a little bit about the pricing environment in the US?
A: Hélène de Tissot (EVP - Finance and IT): The US market has seen an increase in promotional intensity since January 2024, which has slightly improved over the summer. Pernod Ricard closely monitors brand performance and pricing to ensure competitive positioning.
Q: Are you embedding any potential tariffs on cognac in China in your outlook?
A: Alexandre Ricard (CEO): The anti-dumping investigation is ongoing, and we believe we do not engage in anti-dumping. Despite weak demand in China, we expect global growth due to our diversified geographical footprint.
Q: Could you clarify your expectations for China in fiscal 2025?
A: Alexandre Ricard (CEO): We expect a similar trend to fiscal year 2024, with a 10% decline due to weak consumer sentiment. However, we remain confident in our global growth potential.
Q: Have you seen an increase in promotional activity in Europe?
A: Alexandre Ricard (CEO): The European market has normalized post-inflation, with regular promotional strategies. We are satisfied with our market share gains across most European markets.
Q: What are your expectations for finance costs and FX for fiscal 2025?
A: Hélène de Tissot (EVP - Finance and IT): We expect the cost of debt to be around 3.5% in fiscal year 2025, up from 3.2% in fiscal year 2024. FX impact could be slightly negative, but it's too early to provide specific guidance.
Q: Are you seeing increased competition in southern Chinese cities?
A: Alexandre Ricard (CEO): The main issue in China is weak consumer demand. Despite this, we have gained market share and continue to invest efficiently in our brand equities.
Q: How long do you expect the inventory reduction in the US to last?
A: Hélène de Tissot (EVP - Finance and IT): We anticipate inventory adjustments mainly in Q1 of fiscal year 2025. The US market remains attractive, and we expect to improve sellout performance gradually throughout the year.
Q: Do you still expect China to return to high single-digit or low double-digit growth?
A: Hélène de Tissot (EVP - Finance and IT): We remain confident in China's long-term potential despite the current challenging macroeconomic environment.
Q: What changes are you making in the US to address the current context?
A: Alexandre Ricard (CEO): The focus is on executing our strategy with excellence, balancing off-trade and on-trade activations, and reallocating resources to key brands and growth relays.
Q: How have you increased your organizational capability to activate more brands?
A: Alexandre Ricard (CEO): Our digital transformation journey allows us to leverage tech and data for precision at scale, freeing up additional A&P money and enabling more brand activations efficiently.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
