Pernod Ricard cautions of slower growth after stellar quarter

By Dominique Vidalon

PARIS (Reuters) - Demand in China and India powered a 10.4 percent rise in quarterly sales for France's Pernod Ricard, helping the maker of Absolut vodka and Martell cognac offset slower progress in its main U.S. market.

Pernod, the world's second-biggest spirits group behind Britain's Diageo, however cautioned sales growth would moderate in the full 2018-19 financial year, notably for Martell cognac in China after a stellar first quarter.

Chief Executive Alexandre Ricard told Reuters his group was closely monitoring trade tensions between the United States and China, although the company had yet not seen any impact from it on demand for its products in China.

He predicted Chinese sales would still grow at a double-digit pace this year.

Pernod said that despite an uncertain geopolitical and monetary environment, it was keeping its forecast for a 5-7 percent organic rise in full-year profit from recurring operations after last year's 6.3 percent growth. Its financial year runs until the end of June.

Pernod shares added 0.8 percent by 0915 GMT, with the stock down less than 1 percent so far in 2018. The company has a valuation of around 34.5 billion euros ($39.8 billion).

"The consensus is at the high-end of this range at 6.8 percent, while the Asia results are strong, the company is clearly indicating that investors cannot rely on that kind of growth in Asia," said Liberum analysts in a note.

"In light of some softer results in the U.S. and Europe, we wonder if consensus might drift back towards the mid-point of that range," they added.

Pernod's first quarter sales came in at 2.387 billion euros ($2.74 billion), a like-for-like rise of 10.4 percent that beat analysts' estimates for 7.4 percent like-for-like growth.

Pernod said it benefited from advance shipments in China ahead of the Mid-Autumn and Chinese New Year festivities and from a low year-ago comparison in India, where it has faced setbacks including a ban on liquor outlets.

The group, whose other brands include Jameson whiskey, said sales in India rose 34 percent in the quarter, while in China sales leapt to 27 percent in the first quarter, led by strong demand for Martell cognac and by double-digit growth in Chivas whisky.

Pernod said it would benefit in the first half from the earlier timing of the Chinese New Year, but growth would then moderate.

In the United States, where sales were up 2 percent in the quarter, Jameson whiskey continued its double-digit growth but the Absolut vodka brand was still in decline.

Pernod tied the overall slower growth in the U.S. to high year-ago comparables when demand had been boosted by strong demand in anticipation of price hikes in Jameson whiskey and Tequila notably in California, but said the underlying trend remained broadly in line with that of a growing market.

($1 = 0.8697 euros)

(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta/Keith Weir)