Pernod Ricard, the world's second-largest distiller, plans to eliminate jobs as it seeks to generate €150 million of savings following a slump in demand in China.
The cuts, which represent about 900 jobs or 5 per cent of the Paris-based distiller’s workforce, are part of a programme of measures to help the company operate more efficiently, chief executive officer Pierre Pringuet said.
Pernod reported an 8 per cent drop in annual earnings as currency fluctuations and a Chinese government clampdown on conspicuous consumption weighed on revenue growth.
Earnings before interest, taxes and some one-time items totaled €2.06 billion, the maker of Absolut vodka said.
The company said Jameson sales volumes reached 4.7 million cases during the 2013/2014 financial year.
Irish Distillers Pernod Ricard CEO Anna Malmhake said the sustained progress of Jameson within the Pernod Ricard family of brands has been one of the group's most eminent success stories, growing from 466,000 cases when Irish Distillers joined Pernod Ricard in 1988, to approaching 5 million cases in 2014.
Sales of Pernod’s so-called top 14 brands, which include Chivas Regal scotch and Kahlua liqueur, fell 2 per cent, dragged down by Martell cognac in China, Pernod said.
The stock rose 1.3 per cent to 89.20 euros at 9.14am in Paris.
Pernod, which generated 30 million euros of savings in fiscal 2014, sees €75 million of savings in the 12 months through June 2015 and the remainder in the following two years, the CEO said.
Operating profit rose 2 per cent, excluding the effects of acquisitions, disposals and currency fluctuations, within the distiller’s 1 per cent to 3 per cent growth forecast.
Pernod is cutting jobs and pushing less expensive liquors such as Ballantine’s whisky in response to plunging demand for premium cognac in China amid a crackdown on lavish spending by government officials.
The company, which gets more than a third of its revenue from Asia, in June predicted an improvement in China next year as inventory levels settle.
While the company’s business environment “will remain challenging, we anticipate a gradual improvement in our sales growth,” deputy chief executive Officer and Chief Operating Officer Alexandre Ricard said in the statement.
Annual revenue totaled €7.95 billion, showing no growth on an organic basis. Currency fluctuations reduced sales by 6 per cent.
Organic sales fell 23 per cent in China and declined 4 per cent overall in Asia and the rest of the world region, Pernod said. Sales growth slowed in the Americas, growing 2 per cent, due to the US and travel retail markets.
Europe showed a “marked improvement” with sales there growing 2 per cent.
Bloomberg
