Pernod Ricard S A

and welcome to Peron Ricard 2022 4-Year Sales and Results Conference Call. At this time, all participants are in list and holding mode. After the speaker presentation, there will be a question and an answer session. To ask a question, you will need to press star 1 and 1 on your telephone. I would now like to end the conference over your speaker today. Please go ahead.

Good morning, ladies and gentlemen, and welcome in Paris, at the island, for a FY22 full-year sales and results presentation, followed by Q&A. Before I leave the floor to Hélène and Alexandre, you're going to see a short movie from the Glenlivet. The Glenlivet

Well, good morning to all of you. I do hope you have spent a very nice summer, enjoying very convivial moments, and more importantly, around the right brands. So welcome to the island for our fiscal year 22 full year sales and the results. And let's start directly with the executive summary. Maybe, Hélène, I'm going to grab yours. Nope. There we go. So fiscal year 22 has been a historic year for Bernard Ricard, with our net sales growing by 21%, hitting the 10 million euro milestone at 10.7 billion euros, with market share gains across most markets, leveraging both our very wide portfolio of brands and our geographic breadth. we've increased prices basically everywhere with an average mid single digit price increase globally and our growth has been driven by the strong recovery of the on trade by the strong resilience as well of the off trade and the rapid rebound of the travel retail channel Strong growth as well driven by balanced and diversified sources. I think this is absolutely important. And if we start with our must-win markets, strong dynamism across all must-win markets. You see India at a whopping plus 26%. Travel retail at plus almost 50%, the U.S. at plus 8%, and China at plus 5%. Performance has been outstanding across all regions, but in particular in Europe, in Africa, and Central and South America. And finally, excellent broad-based growth across the portfolio, with our strategic international brands growing by 18%. Our specialty brands growing by 24%. And finally, our strategic local brands, in particular, our Indian whiskeys growing by 18%. And this has delivered a record profit from recurring operations at 3 billion euros, driven as well by revenue growth management, as I mentioned, but as well by operational efficiencies, which have offset the impact of the inflation. This has also allowed us to deliver gross margin expansion and finally delivering a record operating margin of 28.3 with an expansion of 80 basis points or 52 basis points on an organic basis. These results demonstrate the strength, the agility, and the resilience of Pernod Ricard's business model. We are deploying the Conviviality platform at pace. I hope most of you were here for Capital Markets Day before summer, where we presented the Conviviality platform. And by the way, I'd like to take this opportunity as well to mention that we will be announcing in the coming days a partnership with a very emblematic French partner company, regarding the data portal we have been developing over the last three years. So stay tuned for that new news. So anyways, we are deploying our consumer-centric strategy at scale now, leveraging our portfolio of brands, leveraging our distribution network to really further stretch our growth and now accelerating thanks to data. We have strengthened our portfolio of brands through additional investments, through innovations, and of course continuing our bolt-on acquisition strategy, which this year included the Whiskey Exchange, more recently Chateau Sainte-Marguerite, and a minority stake in sovereign brands. Our specialty brands portfolio is now double what it was just pre-COVID in 2019 and now represents 6% of our net sales. And this growth and the development of our strategic roadmap has been done responsibly. So we're well advanced as well on delivering our sustainability objectives within good times from a good place. we've also delivered a record high cash generation and continuing to deliver our business so we have the highest ever free cash flow at 1.8 billion euros and finally a net debt ratio at 2.4 we are investing in the future growth of our business with increased strategic investments And all these results allow us to accelerate the returns to our shareholders with a strong dividend growth of plus 32% versus last year and the announcement of a new share buyback program of roughly 500 to 700 million euros for this fiscal year. You see here the key figures. I won't dwell upon them. Hélène will go through them in detail, just to underline the reported net profit up at 53%. And I think it's important to just sit back for a second and look at our willing formula or the way I like to see it, which is our unique competitive advantages, our fundamentals, which, number one, are comprised of what we believe is the widest, the largest, the most comprehensive portfolio of premium spirit brands, number one. number two are diversified and global footprint and scale which is even more so important when the environment is volatile and cycles are uneven between regions between segments between markets and most importantly our unique culture which blends conviviality and performance where people really want to go the extra mile with a very high level of engagement and by the way We recently had a very successful participation to our second ever employee stock ownership plan. This formula is also fueled by very favorable underlying dynamics or drivers, demographics to start with, with the legal drinking age population. The growth of middle and affluent classes in emerging countries, not just China, not just India, not just Sub-Saharan Africa, not just LATAM, basically all these markets. Consumer trends, and that's true for the whole world with premiumization. which is an established long-term fundamental trend, and the resilience, and we've seen it over the last few years, of wine and spirits during economic downturns. Finally, the global spirits market value growth of plus 11% versus pre-COVID 2019 shows that premium plus spirits are outperforming. Again, and I think this is critical, diversification of the sources of growth of Pernod Ricard, which was, still is, and is going to continue to be a very strong strategic intent, having diversified sources of growth, which is a big change versus 10 years ago, 80%. of our growth comes from six spirits categories. You see here by category the contribution of each category to our fiscal year's growth and the weight in the portfolio. I'd like to stress the Scotch whisky performance which has weighed for 30% in Pernod Ricard's growth and that represents a little bit more than 20% of our net sales. Irish whiskey as well, very strong contributor to our growth with 16% contribution to growth and weighing for 12% of our business. The Seagram's whiskey as well, 11% contribution and weighing for 9% of our business. Vodka, in particular, Absolute, of course, weighing 9% of our growth and 8% in our business. Gin has been a strong contributor to growth. And finally, cognac and brandies as well. So really diversified sources of growth when it comes to our portfolio of brands. And by the way, with a clear skew to premium plus, 76% of our net sales come from premium and above categories. And they contribute to 80% of our growth. And likewise, not just from a portfolio standpoint, but as well from a geographical standpoint, you have here the similar analysis where you have the contribution to growth from our regions, the weight of our regions in our business, and the growth of our regions for fiscal year 22. There's double digit everywhere. I won't go through these numbers. I just think that what they clearly stress and underline is the balanced nature of our growth, the diversified sources of our growth, which is absolutely critical. And as I mentioned, our growth, our excellent results were driven responsibly. So you have here our strategic roadmap from an SNR point of view. It is at the core of everything we do. Our SNR objectives are now embedded throughout the whole business. It's really every single function in the business is today perfectly concerned. You have here progress to date on a number of objectives we set ourselves. As you know, this roadmap was launched back in 2018. We update it regularly. And I'm particularly proud of the recent investments we made, especially in Scotland and in Ireland, with more announces to come, so please stay tuned. And again, this is perfectly in line with our long-term sustainable value creation strategy. This is a quick recall of what we presented to you during Capital Markets Day. Our medium term financial framework, where it's all about growing our top line between 4% and 7% growth, aiming at the up range of that interval, powered by what we call the conviviality platform. Leveraging data at scale. Focus on pricing, of course, for sure. Continuous improvement in operational efficiency as well, as we've done this year again, with significant investment behind our strategic priorities in terms of brands. with efficiency on return on spend, of course, discipline, of course, on our structures and on the organization to drive operating leverage of roughly 50 to 60 bits on average every year. Financial policy, as I mentioned, our objective has been and will continue to be to maintain investment grade rating, of course. Number one, priority number one is to invest in the future organic growth of our business, in particular through our strategic inventories and CapEx, which we've done this year and will highlight what we intend to do in the coming year. Continued active portfolio management, including value creating M&A. So please expect our bolt-on acquisition strategy to continue. Dividend the distribution of roughly 50% of our net profit from recurring operations. And finally, share buyback when the above priorities are fulfilled. And this is what happens. So, you know, our strategic plan four years ago, which was updated this year for the next three years, what this shows is We say what we do and we deliver what we say we will deliver. We're perfectly in line with our plan. And just to remind you what our plan is about, it's a story that started with top line growth, focus on growth, which then became focus on profitable growth with profit margin expansion of roughly 50 to 60 bps per year. focus on diversifying the sources of growth and of course by delivering strong cash flow. We said we would deliver this and we have delivered this. Very briefly, you have here our sales, as I mentioned, very strong growth, pretty well balanced and broad-based by region. Number one, a quick focus on our must-win markets with the U.S. that has grown on average 8% over the last three years, delivering again 8% over the last fiscal year. I would just stress maybe two things on the U.S. First of all, very strong price mix following basically broad-based price increases in fiscal year 22. with additional price increases to be implemented as early as now, in fact, in September and October. Number two, I would also stress the very strong performance of our specialty brands portfolio in the U.S., in particular our American whiskeys, Jefferson, Rabbit Hole, TX Whiskey, Smooth Amber, but as well our agave-based portfolio and Red Rest. China, well, again, a three-year average growth rate of 9%, delivering 5% over the last fiscal year. We've had a good start of the year last fiscal year, which was a little bit impacted by strict containment measures, as you know, which impacted our Q4 at Pernod Ricard. The trend has improved since the month of June with the easing of restrictions, and so far we've had a pretty good start to the year in China. Travel retail up roughly 50%, with three-year CAGR still negative, down 13%. However, I would stress two things. Our value leadership has been reinforced quite significantly in travel retail. And for this new fiscal year, we expect travel retail profit to be back to pre-COVID levels, which I believe is is great news for the channel and, of course, for Pernod Ricard, given the weight of the channel. And finally, India, which has grown on average 7% over the last three years with a clear acceleration over the last fiscal year, where India grew 26%, where we reinforced our leadership position. And not only did the strategic local brands perform well, our strategic international brands performed exceptionally well, principally led by our Scotch portfolio, by Jameson Whiskey, which is becoming a cult brand in India, and finally by our Vodka Absolute. I think it's worthwhile still spending a couple minutes on the rest of the world because there's been a very strong performance as well with pricing across all markets as well. If you look at Europe, a three-year average growth rate of 6%. I think that's really what surprised me. Strong continued growth with a whopping plus 19% for the last fiscal year. If you look at the performance of Spain, up 36%. And again, we've had a good start of the year with a great summer in Spain. There was some growth as well in France, albeit with a margin squeeze given the inflationary context here in France. Very strong growth in Germany, up 10% with a very strong on-trade rebound. A whopping 42% in Italy, which had a great summer as well. When it comes down to Eastern Europe, well, very strong performance in Poland, but obviously the performance is impacted by the conflict, the war in Ukraine since mid-February. And you should expect, again, a significantly subdued activity for fiscal year 23, particularly in Russia. Strong on-trade rebound in the UK with great sales growth driven by Jameson, Absolute, Havana Club, and more generally our specialty brands like Monkey 47 and Malfi. With regards to Americas, which is up 12%, with a strong KGAR, a three-year KGAR of 8%, would just stress the whopping 52% growth in Brazil. Asia, rest of the world, up 19%, with a three-year average growth rate of 4%, would just stress, while Korea, up 33%. South Africa up 38%, Nigeria up 81%. Outstanding performance in Turkey and very strong performance for our Champagne and Scotch in Japan. From a category point of view, in terms of segments, as I mentioned, strong growth across all spirit categories. Soft performance though for our wine portfolio, which was particularly hit by a lower harvest for our Sauvignon coming from New Zealand. I would just like to stress the excellent performance of Jameson up 24% with a three-year double-digit KGR of 12%. We've broken the 10 million case milestone for Jameson this year which is just amazing with the fastest growth rate in 30 years for the brand. double-digit growth in the U.S. with a very successful launch of our innovation Jameson Orange. But I'd like to stress as well the success of the internationalization strategy of Jameson with growth accelerating to 38% outside of the U.S. with great performance in India, as I mentioned, but South Africa as well, Nigeria, and many, many other markets across the world. And I'd like also to underline the very strong performance of Jameson Black Barrel, up 43%. Absolute up 19% with a 4% CAGR. Again, we've broken a milestone with Absolute, 12 million cases this year with global expansion driving an acceleration of the performance for Absolute. European markets are core growth drivers for the brand, where the brand grew double digit, but as well, growth basically everywhere else. Scotch is up 25% with a 5% average annual growth for the last three years. And this growth is driven by the entire portfolio of brands. You see Chivas up 29%, Ballantines up 28%, Glenlivet up 21%, and Royal Salute up 38%. Martel finally, which grew 7% with good growth on the basis of a very high comparison, notably in China. Excellent growth with Martel Blue Swift in the US and with a very successful marketing campaign. Some moderate growth in China, as I explained, especially between March, April and May due to some of the lockdowns and continued global expansion of the brand with particularly strong results in sub-Saharan Africa. As I mentioned in the introduction, specialty brands have now doubled in the last three years. You see our specialty whiskey up 23%, our specialty agave brands up 21%, specialty gin 43% growth. And finally, I would like to stress as well the great performance of Lillet and Italicus that has doubled over the last fiscal year. Finally, the rest of the portfolio, I won't dwell upon it, but good balanced growth across all brands, in particular Beefeater. And finally, I'd like to stress the very, very strong growth of our RTD portfolio, particularly in the US and in a number of European markets. Innovation has been a strong contributor to growth, perfectly in line with our strategic roadmap. Our innovation portfolio grew 45%. I mentioned the very successful launch of Jameson Orange, and we have also launched Jameson RTDs with Ginger and Lime. Avion Cristalino, great success, such a great success where we ran out of stock. So if you find any bottles of Avion on shelf, just make sure you buy them. Some more to come, great performance of our innovation around the Beefeater as well and the launch of Royal Salute 21 blended grain. And before handing over to Hélène, we've really stepped up in terms of media investments and media activation. You have here a number of examples and why not introduce the Jameson campaign before handing over to Hélène. So please enjoy.