Pernod Ricard Doubles Down on Whiskey -- 2nd Update
29 Août 2019 - 01:03PM
Dow Jones News
By Saabira Chaudhuri
Pernod Ricard SA extended its bet on whiskey, saying it is
acquiring the New York-based maker of Jefferson's bourbon and plans
to open its first distillery in China.
The maker of Chivas Scotch whisky, Jameson's Irish whiskey and
Absolut vodka said it agreed to buy Castle Brands Inc. for $223
million through a cash tender offer. Pernod has beefed up its
exposure to American whiskey with a string of recent investments,
taking a majority stake in Rabbit Hole bourbon in June and
purchasing Texas-based TX whiskey earlier this month.
The world's second-biggest international liquor maker after
Diageo PLC is under pressure from hedge fund Elliott Management
Corp., a prominent activist investor that has become one of its
largest shareholders. Elliott has criticized Pernod's management,
saying the company has underperformed its peers and should raise
its operating margin.
On Thursday, Pernod nominated two new external directors
following criticism from Elliott that its board was too French and
insular. It announced a share buyback of up to EUR1 billion ($1.11
billion) and said it was raising its dividend. The company's shares
climbed 4.1% Thursday, after Pernod also reported full-year results
that beat analyst estimates.
Bourbon has been a high-growth category for spirits makers in
recent years, helping companies like Pernod and Diageo offset
sluggish demand for less-fashionable categories such as vodka.
Sales of U.S. whiskey globally rose 8.7% last year by volume,
according to industry tracker IWSR, while bourbon climbed 7%. Vodka
volumes declined 2.6% and rum grew 1.7%.
Pernod also said it plans to open a distillery in Emeishan, in
China's Sichuan province, that will produce malt whiskey. Pernod's
Asia head, Philippe Guettat, said the company is aiming to give a
local edge to the drink and plans to appoint a Chinese master
distiller.
Asia has been a focus for global alcohol makers as they grapple
with declining volumes in the West. On Thursday, Pernod said sales
in China jumped 21% last year.
Chinese drinkers, who have favored local spirit Baijiu and
cognac, are increasingly driving whiskey sales. Whiskey volumes
climbed 11% in China last year, according to IWSR, driven
predominantly by Scotch consumption.
Pernod's net profit for the year ended June 30 was EUR1.46
billion, down from EUR1.58 billion a year earlier. On an organic
basis -- which strips out currency moves and acquisitions --
operating profit grew 8.7%, beating estimates for an 8% rise. Sales
climbed to EUR9.18 billion from EUR8.72 billion.
--Anthony Shevlin contributed to this article.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
August 29, 2019 06:48 ET (10:48 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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