Pernod Ricard share price plunges after China holds back sales in third quarter

Francesca Washtell
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Pernod Ricard owns the Malibu rum brand (Source: Getty)

The share price of Pernod Ricard dropped this morning after the company posted lower-than-expected third quarter sales in a trading update.

The figures

Organic growth for the third quarter was up one per cent year-on-year, which was below analyst estimates of 1.3 per cent in a Reuters poll.

Net sales in Asia and the rest of the world fell 10 per cent to €822m (£649m) in the third quarter.

The French drinks giant, which is the world's second largest spirits distiller, reported negative growth of three per cent and posted sales of €1.86bn in the three months to March 31.

Strong growth was led by shipment phasing the US, but was negatively impacted by an earlier Chinese New Year.

Sales in the first nine months of 2016 totalled €6.8bn. The Americas posted the strongest year-on-year growth, at nine per cent, while growth of five per cent was recorded in Asia and the rest of the world. Continued strong growth in India and Africa was offset by dipping demand and a "tough" situation in China.

Premium wines accelerated four per cent in the year to date, thanks to the UK and Australia.

The company's share prices was down almost seven per cent by 11.30am (GMT), to 96.52p.

Pernod Ricard Pernod Ricard | mobile image

Why it's interesting

This time last year, Pernod Ricard was buoyed by strong sales in China, where high demand helped push like-for-like sales up by seven per cent.

Pernod Ricard's negative experience of the early Chinese New Year contrasts with Heineken, whose results released this week showed it had received a one-off boost from New Year celebrations in Vietnam and China in the first quarter.

The company is the world's number two in wine and spirits sales, owning key brands such as Absolut Vodka, Malibu, Beefeater and Havana Club. At the end of March, Peroni Ricard UK signed an agreement with Corby Spirit and Wine to take over distribution of Lamb's rum in Britain from July this year.

What Pernod Ricard said

Alexandre Ricard, chairman and chief executive, said:

Our sales growth to date at three per cent is solid in an environment that remains contrasted. Our strategy has remained consistent and is driving results: innovation is accelerating; operational excellence is driving efficiencies; our ongoing initiatives in the USA are starting to deliver; we are working actively to develop the new phase of growth in China, where we remain confident in the medium-term potential despite the tough current context.

In short

Pernod Ricard's otherwise relatively strong sales in regions such as the Americas have been offset by a challenging spirits environment in China.

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