UPDATE: Pernod Ricard Not Looking For Large Acquisitions
February 23 2011 - 9:04AM
Dow Jones News
Pernod Ricard (PDRDY), maker of Absolut vodka, Chivas Regal and
Jameson whisky, Wednesday said it isn't looking to make large
acquisitions in the short term, as the French drinks giant
prioritizes organic growth and further cutting its debt.
Major acquisitions are "absolutely not on the agenda," said
Chief Executive Pierre Pringuet at a meeting with reporters in
London. "Our absolute priority is to organically develop our
business," he said, although its strategic goals could change given
appropriate market conditions. "It doesn't mean we will not return
to mergers and acquisitions at a certain time," he added.
Pernod Ricard, like U.K.-based rival Diageo (DGE.LN), has been
linked to Fortune Brands Inc.'s (FO) spirits assets, which include
bourbon brand Jim Beam, after the U.S. consumer goods conglomerate
last December said it would split its businesses. While not
commenting directly on Fortune Brands, Pringuet did dismiss reports
the group had any interest in Remy Cointreau SA's (RCO.FR)
champagne portfolio.
Pringuet, while noting that the group's debt is "no longer an
issue", said another priority is to cut it further. He also said
the company is comfortable with its bond credit rating ambitions.
"We want to be a 'BBB' company. We do not intend to be a single 'A'
company."
Pernod Ricard reduced its debt -- largely accumulated as part of
its purchase of Vin & Sprit three years ago -- by EUR864
million in the fiscal first half to EUR9.72 billion at the end of
December, 2010. Its debt-to- earnings ratio of 4.5 times is down
from 4.9 times from the end of June last year.
Meanwhile, Pringuet said he is optimistic about the general
recovery in consumer demand. "The rebound is coming from all parts.
It is emerging markets led, but I am optimistic about the U.S. and
there are some good signs in Europe."
"Over the last six to nine months [in the U.S.], we have
returned to the pattern of premium products growing faster than the
rest of the market," he said.
Pringuet said the group's guidance for 20% fiscal-year net sales
growth in China, focused on demand for super-premium Scotch whisky
and cognac, is a "sustainable rate of growth for the forseeable
future."
China, which accounts for 9% of Pernod Ricard's total sales, is
set to become the group's largest market after the U.S. and ahead
of France by the end of the fiscal year.
Separately, U.K. CEO Jean-Manuel Spriet said the group's January
performance in the country was better-than-expected, while February
trading was normal. "Confidence is eroding, but the business so far
(this year) is quite normal."
In terms of the impact of rising commodity prices, the company
said that while barley and wheat costs have gone up since July last
year it doesn't represent a major problem, without elaborating.
Earlier this month, Diageo said the margin impact in 2011 from
escalating raw material prices is expected to be largely flat
year-on-year.
Last week, Pernod Ricard raised its fiscal-year profit guidance
after posting a rise in half-year profit on sales growth driven by
strong demand in Asia and its other emerging markets. In Europe,
top-line losses in Ireland, Spain and Greece, hit by macroeconomic
woes, were more than offset by growth in Russia, Poland and the
Balkan countries.
By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410;
simon.zekaria@dowjones.com