Coronavirus will cause 2% dip in sales, says Pernod Ricard

alexandre ricard 2016

Despite reporting a 4.3% rise in operating profit in the first half of 2019, Pernod Ricard has warned that the coronavirus outbreak could cause a 2% fall in its FY2020 sales and a 3% reduction in overall operating profit.

In its half-year figures, operating profit experienced 4.3% organic growth to reach €1.8 billion, while sales totaled €5.5 billion, achieving organic growth of 2.7% and reported growth of 5.6%.

Among Pernod Ricard’s top-performing brands were Royal Salute, which experienced 17% organic sales growth, The Glenlivet 15%, Malibu 13% and Beefeater Gin 12%. The group’s entire Scotch portfolio experienced an overall 4% rise in sales. However, brands including Absolut (-1%), Chivas Regal (-2%), Ricard (-5%) and Champagne Mumm (-3%) all experienced a fall in sales.

The group is performing particularly well in China, with an 11% growth in sales in the region. However, the French firm scaled back its predictions for the growth of its operating profit from recurring operations in FY2020, from 5-7% to 2-4%. This follows a similar move by Diageo.

Pernod Ricard revealed that all on-trade outlets in China will close this month until the end of June in Hubei province, the centre of the virus outbreak. Elsewhere in the country, it stated that it expects a “gradual recovery” from March, with the restoration of normal operations by June.

Commenting on the effects of the coronavirus, Alexandre Ricard, chairman and chief executive officer, said, “Looking to H2 FY20, the environment remains particularly uncertain from a geopolitical standpoint, with the additional pressure related to the COVID-19 outbreak. While we cannot currently predict the duration and extent of the impact, we remain confident in our strategy.

“Our first priority is to ensure the safety and wellbeing of our employees and business partners. I would like to praise the exemplary behaviour of our teams during this difficult time. We fully support their efforts, as well as those of the Chinese people and authorities to contain the epidemic.”

Ricard adde, “H1 FY20 demonstrated solid growth and resilience of our business model. Our three year-plan transform & accelerate is driving success, as evidenced by the diversification of the sources of growth in terms of geographic footprint and categories, continued strong pricing and ultimately the improvement in operating leverage.”

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