Q3 “saved” by the solid start of the quarter in occidental countries, but Q4 should be worse as it will be reflecting the total COVID-19 impact. It is now difficult to believe in a “strong” V-shaped recovery next year.
Companies: Pernod Ricard
A strong H1 FY20 has beaten the PRO expectations, while the FY20 guidance has been cut (purely) on the Coronavirus troubles. The market finally paid for the group’s transparency about the impact.
Although expected, Pernod Ricard reported results that we judge are even worse than what we had expected. Q1 sales growth was moderate and this is a clear picture of what’s going to happen during the year. However, it is in line with the group’s medium-term outlook. FY20 guidance confirmed.
A strong set of FY19 numbers, broadly in line with our expectations. Many announcements: increased dividend, launch of a share buy-back programme, Castle Brands acquisition, and the nomination of two independent directors. Unchanged guidance compared to last year but a slowing in Q1 is expected principally due to an unfavourable comparison base in Asia/RoW. However, the group has also advised that it sees a dynamic start in the US. All in all, no reasons to be significantly worried. We see positive trends continuing.
As expected, slower Q3 19 reflecting the start of wholesaler inventory optimisation in the USA, as well as the earlier Chinese New Year. However, we are confident that the group will reach its guidance with, especially, sustainable premium products growth and good price-mix. No major change in our estimates are expected.
Pernod Ricard had a conference call relating to EMEA and LatAm this afternoon, giving some clarifications on the region.
As a reminder of the H1 FY19 results:
the top-line growth was +3%
Good price/mix: +5%
Softer Western Europe, but significant development in emerging markets
By geography, the EMEA region was pushed by significant growth in Russia (+7% in H1 FY19) and Poland (+6%), which have been driven by strong growth in whiskies and successful premiumisation respectively. Turkey showed double-digit growth driven by price increases and solid volume growth thanks to the multiplication of channels. Western Europe was less bright with Spanish sales declining by 2% (Beefeater and Ballantine both declined), while Germany was also negatively impacted by a commercial dispute. The UK reported a strong performance in spirits but a decline in H1 driven by wines. In Africa, the group reported strong growth in Nigeria, where sales of all products doubled in H1, as well as double-digit growth in South Central Africa. South Africa and Angola were softer. In the LatAm region, the group continued to gain market share, especially in the Premium categories in Mexico (H1 decline due to high comparison basis) and Strategic International Brands in Brazil (+6% in H1).
Strong start to the year driven by China and India which were partially helped by technical factors (GST, sell-in ahead of festive season in China). However, the US and Europe were below expectations. Q2 is expected to be driven by CNY, whereas growth should return to much more moderate levels in H2. As a consequence, the enthusiasm in the stock could be more tempered (especially in the light of a potential slowdown in China reported by the luxury sector).
Good underlying performance driven by Asia (notably China and India) but also a stable US. Guidance suggests that the group expects in FY19 at least a similar performance to this year. Our Add recommendation is maintained, although we see some cuts linked to the FX headwinds.
Very strong underlying performance (Q3: +9.3%) on the back of China, India and Travel retail. Q4 is expected to be weaker notably in China. The increase in the dividend distribution should please investors.
We see little change to our target price as stronger FX headwinds weigh on the reported figures.
Very strong set of results driven by the acceleration in China, India and Travel retail. The numbers are a beat at the organic level and in line with consensus on the reported figures.
The mounting FX headwinds wipe out the positive organic development of the operating margin. Consequently, we see no major changes to our current target price.
Q1 update: Sales grew organically +5.7% (cons. +3.1%) and +2% on reported figures (FX: -3%).
OG by division: Europe +3% (cons. +2.7%), the Americas +6% (cons. +5%), Asia/ROW +7% (cons. +3%).
OG by category: Strategic International brands +8% (very strong performance), Strategic Local brands +2%, Wines +8% (very strong quarter).
The FY guidance is maintained.
FY update: sales are up +3.6% organically (in line with consensus, Q4: 3%) and +3.8% on reported figures. The profit from recurring operations grew organically +3.3% (in line with consensus). The reported operating margin stood at 26.6% (+40bp, in line with our estimates).
Organic sales growth by region: Americas +7% (Q4: +6%), Asia/ROW +1% (Q4: +1%), Europe +3% (Q4: +2%).
Organic sales growth by category: Strategic international brands: +4% (vs. 0% last year), Strategic local brands +1% (impacted by India), Wines +4% and Others +3%.
The group highlighted the good US performance (+5%), China is back to growth (+2% vs. -9% in FY16). There has also been an improvement in Eastern Europe (driven by Russia +16%) and Global Travel Retail (European part is still in decline). India is expected to improve in FY18, starting from Q2.
Net profit for period is up + 13%, whereas the dividend is up +7% (€2.02).
For FY18, the company expects organic growth in profit from recurring operations to be between 3% and 5% (better than 2-4% in FY17). Good sales growth is expected to continue in the US, China, Europe, and for Jameson. Sales should also improve vs. FY17 in India and for Chivas. FX is likely to have an adverse effect (-€125m, on weakening dollar) on profits from recurring operations.
Q3 update: sales are up +3% on an organic basis (cons. +0.9%) and +7% on reported figures.
By region: the Americas recorded a nice +8% (cons. +2.8%) and Europe +7% (cons. +2.1%), whereas Asia/ROW stood at -2% (cons. -1.2%, impacted by the demonetisation in India and the early CNY).
After 9M, organic sales are up 4% with the Americas +7%, Europe +4% and Asia/ROW +1%.
FY guidance is maintained: organic growth in profit from recurring operations to be between 2% and 4%.
H1 update: sales were up +4% organically (Q2: +4% vs. cons. 2.4%) 3% restated for the Chinese New Year and +2% on reported figures. Organic profit from recurring operations was up +4% (cons. +3.1%). Operating margin is up +60bp to 29.6%.
Organic sales growth by region: Americas +7%, Asia/ROW +3%, Europe +3%. OG by category: Top 14 brands +6% (driven by volumes), Strategic Local brands +1% (impacted by demonetisation in India), Wines +2%.
The FY guidance is maintained: organic growth in profit from recurring operations to be between 2% and 4%.
Pernod’s Q1 update: sales grew organically +4% (cons. +2.7%).
OG by division: Europe +6% (cons. +2%, +2% restated for technical impact), the Americas +8% (cons. +2.8%), Asia/ROW +0% (cons. +2.5%). On reported figures, sales were up +1% (FX: -3%).
OG by category: International brands +3% (vs. 2% last year), Strategic Local brands +5% (in line with last year), Wines -1%.
The company highlighted the good performance in the US and India, early signs of improvement in China, and a difficult Africa & Middle East (due to macro and geopolitical situations) and Travel retail in Asia & Europe.
The company maintained its FY guidance: 2-4% organic growth in profit from recurring operations.
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Companies: Venture Life Group
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Companies: Finsbury Food Group
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Companies: Premier Foods
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