• Very strong growth in Wine and Spirits operating profit ( + 25% at constant exchange rates) • Very satisfactory growth in net profit excluding exceptionals: + 3.7% • Fast debt paydown continues
Paris, 25 September 2003 - The Board of Directors of Pernod Ricard, meeting on 24 September 2003 under the chairmanship of Patrick Ricard, approved the first-half 2003 accounts and has issued guidance on the outlook for the full year 2003.
Wine and Spirits: growth in profitability
The first half of 2003 has been characterised by strong currency fluctuations, a difficult economic environment in many countries (France, Ireland, Japan, Korea and Latin America) and the impact of SARS in Asia. Despite this environment, the Group has delivered an increase in profitability in Wine and Spirits.
Wine and Spirits operating profit was €279 million (up 5.2%), which represents growth of 25%, at constant exchange rates. The operating margin has risen by 1 percentage point, from 17.6% to 18.6%.
This good performance is attributable to volume improvements of Chivas Regal (+4%) and Martell (+9%), as well as to the good performance of growth driver brands (Ramazzotti, Jameson, Jacob's Creek, Havana Club, The Glenlivet).
Wine and Spirits generated sales (excluding duties and tax) of €1.5 billion in the first half of 2003, down 0.5%. This represents an excellent organic growth rate of 8%.
Consolidated results: growth in net income
Non Wine and Spirits activities account for just €4.3 million of the Group's operating profit.
Net financial expenses have shown a marked improvement (- €54 million, down 32%), largely due to the reduction in interest costs (debt paydown, lower interest rates). Due to a taxation rate below 26%, the Group's Net Profit Excluding Exceptional Items was €167 million (up 3.7%), which represents an organic growth rate of 34%.
Free cash flow and debt reduction: a new milestone reached
Free cash flow reached €197 million, compared to €81 million in 2002. This excellent performance is attributable to stronger cash flow (+22%) and to the reduction in working capital requirements (- €37 million), as well as tight control of capital expenditure.
The rapid debt paydown (€307 million) of the first half of 2003 results in net debt below €2 billion (excluding Océane). Including Océane, the gearing now stands at 0.97.
Conclusion and outlook
Patrick Ricard, Chairman and Chief Executive Officer, was delighted with the Group's performance and commented: "the Group has demonstrated its remarkable ability to increase the profitability of its core activities and to pursue fast debt paydown." He added, "the achievements of the first half of 2003 lead us to expect organic growth in Net Profit Excluding Exceptional Items (*) of around 15% for the entire year."
(*)Net Profit Excluding Exceptional Items: after-tax profit net of taking into account results from equity affiliates and minorities, growth measured on the basis of 2003 perimeter and 2002 exchange rates
