China, U.S. help Pernod beat estimates, India lags

By Dominique Vidalon

PARIS (Reuters) - Pernod Ricard beat first-half earnings forecasts on Thursday helped by higher Chinese demand for its Martell cognac and U.S. sales of Jameson Irish whiskey but kept its outlook unchanged as Indian sales growth slowed.

The world's second-biggest spirits group behind Britain's Diageo said sales growth in India, which accounts for about 10 percent of Pernod's revenue, slowed to 3 percent in the first half as an Indian government ban on high-value bank notes held back local whisky consumption.

The situation was likely to continue until the end of the third quarter, Pernod said.

"We are not changing our guidance despite this headwind in India which is offset by a better-than-expected performance in China," Chief Executive Alexandre Ricard told Reuters by phone.

The owner of Absolut vodka, Martell cognac and Mumm champagne kept its target for a rise of 2 to 4 percent in profit from recurring operations for the year to June 30.

First-half profit from recurring operations rose 4 percent to 1.5 billion euros on group sales of 5.06 billion, also up 4 percent.

That was broadly in line with analysts' forecasts in a Reuters poll which called for a profit of 1.48 billion on sales of 5.02 billion.

Second quarter sales rose 4 percent, beating estimates of 3.2 percent growth, and reflecting an increase of 6 percent in America, 5 percent in Asia and 1 percent in Europe.

At 0835 GMT Pernod shares were down 0.09 percent at 108.35 euros.

"Management is doing the right things and there are signs of success across the U.S., Europe and China. However some markets and channels remain challenged and will take time to improve," Liberum analysts said in a note, keeping a "hold" rating.

STRONGER CHINA

In China, sales rose 4 percent in the first half, an acceleration from 1 percent growth in the first quarter, helped by cognac shipments ahead of the Chinese New Year in January.

This reflected a 10 percent rise in Martell cognac sales and the recovery of luxury cognac brand Cordon Bleu although scotch whiskies continued to suffer.

Hit like other spirits makers by a sales downturn in China sparked by a government clampdown on extravagant spending, Pernod Ricard has launched a sales drive there.

It has set up two sales teams in the country, one focused on high-end brands such as Martell and Cordon Bleu and the other on mid-range brands such as Noblige cognac and Ballantine's Finest whisky to better address demand from an emerging middle class.

Pernod's peers have confirmed China was returning to growth with Remy Cointreau and Hennessy reporting robust sales.

In the United States, where sales grew 5 percent, Jameson whiskey continued to grow at a double-digit rate but Absolut vodka - Pernod's leading brand - was still down in value terms

amid increasing price competition.

"Absolut remains difficult. It's more complicated than expected due to a price war in vodka," Ricard told Reuters.

Absolut has been struggling as trendy drinkers turn to brown spirits such as bourbon and niche vodkas such as Texas-based Tito's Handmade Vodka.

($1 = 0.9366 euros)

(Reporting by Dominique Vidalon; editing by Leigh Thomas and Jason Neely)