Pernod Ricard gives more upbeat profit outlook as China sales soar

By Dominique Vidalon

PARIS (Reuters) - Pernod Ricard said on Thursday sales growth accelerated sharply in the third quarter so it now expects profit growth for the full year to be at the top of its previous guidance despite warning of a slower final quarter.

Pernod's sales growth, which beat market expectations, reflected strong demand in China for its Martell cognac during the Chinese New Year festivities in February.

The group said the fourth quarter would be weaker due to tight management of Martell cognac inventories and reduced shipments to China to ensure more sustained growth globally.

The recovery of the Absolut vodka brand in the United States - which makes 20 percent of the U.S. business - was also taking longer than expected, added the company.

Pernod, the world's second-biggest spirits group after Britain's Diageo, said it now expected organic growth in profit from recurring operations of around 6 percent for the full year ending June 30, after giving a range of 4-6 percent in February.

The group said it would also progressively increase dividends over the next three years.

Finance chief Gilles Bogaert told Reuters by phone that Pernod Ricard, which has more leeway for acquisitions given the decline in its debt, remained committed to bolt-on deals although it was also open to bigger-scale opportunities.

The company posted sales of 1.977 billion euros ($2.45 billion) in the three months to March 31, a 9.3 percent rise on a like-for-like basis, and a sharp acceleration from 4.6 percent growth in the second quarter.

The average of analysts' estimates was for 6.6 percent growth in a poll compiled by Inquiry Financial for Reuters.

SHARES EDGE DOWN FROM RECORD HIGH

Pernod shares initially rose as much as 1.8 percent to a record high of 141.90 euros, before losing steam to trade 0.9 percent lower by 0925 GMT.

"Strong third quarter but guidance is in-line with consensus," said Investec Securities analysts, adding market expectations for profit growth already stood at 6.5 percent.

Pernod noted that a rise in the euro would have a negative impact of around 200 million euros on its full year profits - up from a previous estimate of 180 million.

Earlier this week, concerns over a strong euro had also weighed on the shares of Pernod's rival Remy Cointreau, even though Remy reported higher sales.

Pernod's nine-month sales were bolstered by a 19 percent jump in China sales during the Chinese New Year, as well as robust growth in India and higher sales in the United States - Pernod's biggest market.

($1 = 0.8079 euros)

(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta and Elaine Hardcastle)