Earnings increase at Pernod Ricard on Chinese booster

L Half-year profits come in at £1.28bn l Cognac one of the star performers

Pernod Ricard, whose Chivas Bros subsidiary is Scotland’s second biggest Scotch whisky business, has outstripped firsthalf earnings forecasts helped by strong cognac shipments to China ahead of the Chinese New Year in January.

The group said Chinese sales rose 4 per cent in the six months to end-december, up from 1 per cent growth in the first quarter, with sales of Martell cognac up 10 per cent and 7 per cent globally.

Luxury cognac brand Cordon Bleu also showed some recovery, but Scotch whisky sales continued to suffer amid the clampdown by the Chinese government on extravagant spending.

Pernod Ricard said sales growth in India, which accounts for about 10 per cent of its revenues, slowed to 3 per cent in the first half as an Indian government ban on highvalue banknotes held back local whisky consumption.

Group profits rose 4 per cent to €1.5 billion (£1.28bn) on sales also up 4 per cent at €5.06bn. Pernod Ricard said it was keeping its guidance of a rise of 2 to 4 per cent in annual profits for the year to endjune 2017.

“We are not changing our guidance despite this headwind in India which is offset by a better-than-expected performance in China,” Alexandre Ricard, group chief executive, said.

He added that despite the “uncertain environment” the company was confident it could continue improving its performance compared with its last financial year.

In the US, where Pernod Ricard’s sales lifted 5 per cent, Jameson Irish whisky continued to grow at a double-digit rate and 20 per cent worldwide.

Ballantine’s Scotch whisky sales climbed 6 per cent, but Chivas Regal dipped 1 per cent and The Glenlivet malt whisky revenues were flat.

Absolut vodka, Pernod’s leading brand, edged up sales 1 per cent, but was down in America due to rising price competition. Ricard said: “Absolut remains difficult. It’s more complicated than expected due to a price war in vodka.”

Drinks analysts said that Absolut has been struggling as younger drinkers in the US turn to brown spirits such as bourbon and niche vodkas such as Texax-based Tito’s Handmade Vodka.

Pernod’s strong performance came after arch-rival Diageo also turned in a robust halftime outturn recently. Pernod said it had set up two sales teams in China, one focused on high-end products such as Martell and Cordon Bleu, and the other on mid-range brands such as Noblige cognac and Ballantine’s whisky.

The group’s peers have also confirmed China is returning to growth, with Remy Cointreau and Hennessy both reporting robust sales. l The Scotch Whisky Association and the Scottish Craft Distillers Association have launched a partnership to support the whisky industry and its supply chain. They will remain distinct organisations, with their own memberships.