Pernod warns of slower profit growth as spirits dip in China

 
City A.M. Reporter
OD R

OD Ricard yesterday warned profit growth would slow in its current financial year after weakness in Chinese demand for its Martell cognac and Ballantine’s whisky hit sales in the first quarter.

The world’s second-largest spirits group by sales – after Diageo – said it expected demand in China to start improving only from the second half of the year, which ends in June 2014.

China is its second-largest market after the United States, accounting for 12 per cent of sales.

“We expect a difficult first half in China,” finance chief Gilles Bogaert admitted.

“From the second half we should have more favourable comparables and we could see a gradual improvement. But there are still uncertainties over the pace of the recovery.”

Pernod, which has expanded in emerging markets to offset slow sales in austerity-hit Europe, relies on Asia for about 46 per cent of its profits.

Pernod achieved sales of €2.013bn (£1.7bn) in the quarter, a like-for-like decline of one per cent and down from the five per cent growth in the fourth quarter 2012-13.

In western Europe, there was a strong performance in Germany, Britain and France, Pernod said. But Spain was still difficult and hit by an increase in excise duty in July 2013 of 10 per cent.