Whisky giant issues profit warning over coronavirus
THE owner of Chivas Brothers has hailed the performance of its Scotch whisky brands in key export markets as it slashed its profit forecast in light of the risk presented to business in China from the COVID-19 coronavirus.
Pernod Ricard highlighted the “dynamic” performance of The Glenlivet, Ballantine’s, and Royal Salute as it reported a 2.7 per cent rise in sales to €5.47 billion for the first half of its financial year.
Profit from recurring operations increased by 4.3% to nearly €1.78bn.
Pernod, which is transferring its Scotch whisky bottling operations from Paisley to Dumbarton, described as “robust” its performance in the US, India, and China, where the timing of Chinese New Year helped boost sales in the market by 11 per cent. Sales of “strategic” Scotch whiskies increased by 4%, with The Glenlivet, Royal Salute, and Ballantine’s all growing strongly and only Chivas Regal in decline.
However, the Paris-listed company warned that trading conditions remain “particularly uncertain from a geographical standpoint”, as it underlined the “additional pressure related to the COVID-19 outbreak”.
The outbreak uncertainty caused by the disease, which has now contributed to the deaths of more than 1,300 people in China, led Pernod to slash its guidance on profit growth.
Pernod now expects to achieve growth in profits from recurring operations of between 2% and 4%, having previously guided on growth of 5% to 7% on August 29.
Alexandre Ricard, chairman and chief executive of Pernod Ricard, said: “Looking ahead 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.”
China is one of Pernod’s most important markets, accounting for around 10 per cent of its overall sales.
Figures released by the Scotch Whisky Association this week revealed that exports of Scotch to Singapore, through which much of the whisky ultimately bound for China passes through, dipped by 6.3% to £300 million in 2019.
The organisation said of the unfolding coronavirus epidemic on Tuesday: “The SWA are in regular contact with trade officials in China and share guidance with other member companies as appropriate.”
Last week, Hunter Laing, the Glasgow-based Scotch whisky blender and bottler, said it had put exports to China on hold until the crisis eases.
Elsewhere, Pernod reported growth of 4% in the US, driven by whiskies (Scotch and Irish). But the wider industry is facing challenges in across the Atlantic – the biggest export market by value for Scotch whisky – because of new import tariffs on single malt and Scotch whisky liqueur.
Earlier this week, the SWA declared that the introduction by the US of a 25 per cent import tariff on single malt Scotch whisky in October – retaliation for subsidies provided to Airbus by the European Union – was “very concerning.”
SWA chief executive Karen Betts said the tariffs were already “hitting producers hard, particularly small distillers”.
She added: “Some are now asking themselves how they can continue exporting to the US, whether they can build up alternative markets, which is not something that can be done quickly, and if not how their businesses will cope.”
Mr Ricard previously told journalists in Glasgow in September that he was concerned over the potential impact of US tariffs, given the importance of the market for Scotch, Irish whiskey and Cognac.
Pernod said sales in Europe grew by 3% in the first half, driven by the UK, Germany and markets in eastern Europe. But it said “difficulties” remain in France.