Absolut Vodka maker Pernod Ricard edges up profits but struggles in China

Francesca Washtell
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Pernod Ricard took over Absolut Vodka's previous owner V&S Group in 2008 (Source: Getty)

French drinks giant Pernod Ricard has posted a healthy boost in net income but struggled to maintain sales in the Chinese market, pushing its sales almost flat over the year as a whole.

The figures

Net income grew 43 per cent to €1.26bn (£1.05bn) over the 2016 financial year. Sales for the full-year grew one per cent to reach €8.68bn, though fourth quarter sales fell by seven per cent.

Sales growth was driven by a four per cent increase in the Americas and an improvement in the European market, especially in Spain.

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However, the group, which is the world's second largest spirits distiller, struggled in the Chinese market.

Sales fell by nine per cent, pushed downwards by the ongoing economic slowdown in the country and tightened restrictions on gift-giving, where Pernod Ricard's drinks had previously flourished.

The company's raised its dividend by four per cent, reaching €1.88 per share. Its share price was up 2.24 per cent in late morning trading to €1.052.

Why it's interesting

This is not the first time the French spirits maker has been blighted by difficult trading in China. Net sales in Asia and the rest of the world fell 10 per cent in the third quarter.

The company has previously dubbed the Chinese market "tough", although in 2015, Pernod Ricard was buoyed by strong sales in the country.

Today the group said it will adjust its organisation in China to the "new market context", as well as streamlining its operations in other regions including the Americas.

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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.

The company said it expects its performance to improve in 2017 and targeted its topline growth to reach between four and five per cent in the medium term.

It is also looking to cut operating costs by €200m in cash savings between now and 2020.

What the company said

Chairman and chief executive Alexandre Ricard said:

The 2016 financial year was a solid and encouraging year, delivering profit from recurring operations in line with guidance while maintaining investment and implementing significant initiatives to deliver our medium-term strategy and objectives.