U.S. demand for Irish whiskey and Cognac growth in China help lift Pernod Ricard’s sales and profit in first-half

French wine and spirits group Pernod Ricard said on Thursday that half-year sales for 2016/2017 financial year rose 2% to €5.06bn ($5.40bn), driven by continued success of its flagship Jameson Irish whiskey in the United States and a return to sales growth in China, helped by its Martell cognac.

The company which makes Absolut vodka, Club Havana, among others reported a 3% revenue growth in Q2 (Oct – Dec 2016) to €2.8bn, while first-half net profit climbed 3% to €914m.

The spirits maker noted that first-half sales in the Americas rose 4% with the United States accounting for 5% of the growth. Travel Retail in the Americas also returned to growth, driven by expanding Martell cognac distribution and increasing visibility at U.S. airports.

Brazil, on the other hand, saw a 10% market decline due to ongoing weak macroeconomic conditions. Other contributing factor includes price increases on Strategic International Brands following currency devaluation.

Africa and Middle East grew 3% despite growth deceleration caused by macroeconomic and geopolitical factors. However, its Strategic International brands continue to grow such as Chivas, Absolut and Jameson, driven by both volumes and pricing.

Pernod Ricard said that the Indian market showed resilience despite adverse regulatory changes, posting a 3% market gain. It noted that its sales were hurt due to demonetization, whereby the Indian government in December 2016 withdrew INR500 and INR 1,000 Indian rupee notes from circulation in exchange for newer notes as part of its effort to combat counterfeit currency. The company also noted that the ban on highway liquor stores, which are slated to go into effect in April, will hurt second-half sales.

In China, the drinks maker showed clear improvements, driven by Martell cognac which posted a 10% growth. However, Scotch whiskies continue to struggle in that market, it said.

Japan grew 6% for the spirits maker, with double digit growth seen in its Strategic international brands like Perrier-Jouet scotch, Ballantine’s, Chivas and others.

However, South Korea posted double-digit decline, although showing signs of improvement due to what the company described as “adverse market conditions, destocking and transition to new organization”.

Travel Retail in Asia remained subdued due to ongoing negotiation with a key customer, the company said. Scotch whisky category continues to face competitive pressure, it noted.

Pernod Ricard reported a 2% growth in Western Europe, with its home market France posting 6% growth. Spain saw a 5% climb in sales, driven by Seagram’s gin continued success. The company also saw good performance in its whisky portfolio like Chivas, Ballantine’s and Glenlivet. UK market remained strong for the drinks maker, climbing 7%, driven by good performances of its strategic international brands (Jameson, Absolut, Chivas, etc.) Wine brand Campo Viejo performed equally well. Germany also showed strong growth, buoyed by Absolut, Havana club, and Ballantine’s. There was also good success in the aperitif category. However, Western Europe Travel Retail declined in a context that remained difficult, the company said.

Eastern Europe rebounded strongly with 11% revenue growth, driven by 15% growth in Russia, a still difficult but improving environment. The growth was bolstered by its Strategic International brands.

Poland also saw growth spurts and market share gains driven by Pernod’s whisky portfolio.

On outlook, the company said it would stick to its profit organic growth target from recurring operations of between 2% and 4% for the financial-year ending June 30, 2017.

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