The French spirits manufacturer Pernod Ricard, known for brands such as Absolut Vodka and Ballantine's Whisky, reflects on a challenging fiscal year. For the current fiscal year 2025, the company forecasts revenue growth but anticipates a sluggish first quarter, partly weighed down by ongoing inventory reduction processes in the USA.

The past fiscal year ending in June saw Pernod Ricard experience a 4% decline in sales to 11.6 billion euros and a 7% decline in operating profit. Net profit fell by 35% to 1.48 billion euros. These results were influenced by a challenging market environment in China, which is recovering more slowly than expected from the pandemic's impact and is suffering from subdued consumer sentiment.

A glimmer of hope for the corporation was, however, the decision by the Chinese Ministry of Commerce to suspend the punitive measures against brandy imported from the EU. This news caused Pernod Ricard's shares to rise by 2.9% on Thursday, after previously surging nearly 10% following the announcement. The French competitor Rémy Cointreau also benefited from this development and recorded an increase of around 12% in European midday trading.

We have always fully cooperated with the ongoing investigation in full transparency and will continue to do so until it is concluded," said CEO Alexandre Ricard at a press conference.

China's Decision Received Positively by Market Observers

Despite this positive news, the environment for Pernod Ricard and the entire industry remains challenging. The CEO emphasized that the fiscal year was characterized by economic and geopolitical uncertainties as well as the normalization of the spirits market after two years of exceptional growth. Other spirits manufacturers face similar challenges, as sales growth has returned to normalized levels after the pandemic-driven boom, particularly in the USA.

Analysts, however, remain skeptical whether Pernod Ricard can achieve its mid-term targets confirmed by the company on Thursday. RBC Capital Markets referred to these targets as "overly optimistic" in an analysis. In the mid-term, Pernod Ricard aims for revenue growth at the upper end of the target range of 4% to 7% and an organic operating leverage of 50 to 60 basis points.

Barclays also critically evaluated this confirmation of the forecast. 'It is increasingly optimistic to expect this range to be achieved without structural changes in the company,' wrote the Barclays analysts in a message to their clients.