Profits fall at Jameson maker Pernod Ricard as global demand wanes

Profit from current operations in the first six months until the 31st of December reached €2.14bn, representing an organic decline of 3%, but marginally better than analysts' expectations of a 5.1% decline.

Jameson maker Pernod Ricard warned that sales would flatline this year after a challenging first six months, but is hoping for improved demand in key Chinese and US markets from the second half.

The world's largest spirits maker said full-year organic operating profit would grow at a low, single-digit rate, adding that strict control over costs would drive margin expansions. 

Pernod Ricard, which also owns Martell cognac, Mumm champagne and Absolut vodka, said it would buy back €300m worth of shares this year, having already repurchased €150m of stock in the first half.

Profit from current operations in the first six months until the 31st of December reached €2.14bn, representing an organic decline of 3%, but marginally better than analysts' expectations of a 5.1% decline.

Sales in the US, China and Europe fell during the first half, with India being a lone bright spot by showing growth. Sales of Martell, Jameson and Chivas Regal were all down due to weaker demand in China, the US and Latin America.

Sales at Pernod amounted to €6.59bn in the first half, down 3% organically and on par with analysts' expectations with an economic slowdown across China dampening demand while inventory adjustments in the US continued after a post-covid surge. 

Reporting "resilient" demand in its US market, the spirits makers posted share gains on Jameson Original, Malibu, Kahlua, The Glenlivet, Código and Jefferson’s.

Pernod Ricard added that Jameson was continuing its international expansion, helped by demand in Asian markers, while strategic international brands overall fell 4% in the period. 

The spirits maker subsidiary, Irish Distillers posted a 1% fall in net sales across its portfolio of Irish whiskeys, with chief executive, Nodjame Fouad adding it remained "confident in our growth strategy of diversifying our portfolio of Irish whiskeys and further developing brand affinity for Jameson in mature markets."

In China, where sales fell 9% in the first half, Pernod said sentiment remained "cautious" ahead of the Lunar New Year.

Pernod Ricard, like rivals Diageo or Remy Cointreau, has seen strong growth over the past two years with sales lifted by home consumption during covid and price increases.

“We delivered a robust performance in the first half of the year, as we confidently steer Pernod Ricard through the normalization of the spirits market, following two years of outstanding growth," said chief executive of Pernod Ricard, Alexandre Ricard.

"We achieved strong Gross Margin expansion on the back of substantial pricing actions, thanks to the power of our premium portfolio."

"With a diversified footprint spanning mature and emerging regions and a broad presence across spirits categories, we are able to weather volatility and continue to gain share in many markets."

Additional reporting from Reuters.