Pernod Ricard S A

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Good morning, everyone, and welcome in Paris for our FY23 half-year results and sales presentation. So we're going to start with a presentation from Alexandre Malhelen, followed by a Q&A session. Alexandre, over to you.

Well, thank you very much, Florence, and good morning to all of you for our first half of fiscal year 23 sales and results. And let's dive quickly into them. Well, first of all, we've enjoyed a very strong first half with reported sales growth of 19% and reported profit from recurring operations of plus 21%. From an organic point of view, both our sales and profits grew 12%. Now, beyond these numbers, which we believe are very strong, I would like to stress the quality of these numbers. Number one, these sales are really broad-based and diversified, which basically is the consequence of a pretty resilient consumer demand, the continued premiumization of our brands and portfolio, and the growth coming indeed from all regions, and we'll see this in some detail later on. I think the other important message is we've sustained our margins, and I think that is absolutely important in what we can qualify as a high inflationary environment. And this is driven by a plus 10% price effect. While leveraging revenue growth management initiatives that have been boosted, by our digital transformation, in particular a key digital program called Vista RevUp for revenues going upward. Our volumes have enjoyed growth of 3%, and of course, to maintain and sustain our margins, we've also worked quite heavily on efficiencies across all operations. We keep on investing in sustainable future growth, Number one, we've invested behind our digital transformation quite significantly. Our marketing investments have been enhanced by our key digital programs. We have an example or two later on in the presentation. We keep on investing in CapEx, and you've all seen all of the announcements we've made over the last six months, in particular in Scotland, in Ireland, in North America. but we keep on investing as well in China, behind our distillery in particular, our aging facilities, to build our strategic inventories and drive or fuel future growth. And finally, of course, active portfolio management. Well, one of the big objectives is obviously to create long-term shareholder value. If you look at our five-year annualized total shareholder return, It's 11%. And we are confirming this morning the higher end of the range of our share buyback for this fiscal year of 750 million euros, of which we've already carried out 150 over this last first half. So these are the big highlights of our first half. I won't dwell about these numbers. We'll come back into most of these in more detail in a few minutes, including with Elena. But as I was mentioning, I think the quality of the growth is the fact that it is broad-based. It is coming from all regions. You see the Americas region with organic sales growth of plus 7%. You see Europe with organic sales growth of up 6%. and the rest of the world, Asia, growing by 18%. By the way, we have a pretty balanced footprint, global footprint, with America is representing today 28% of our business, Europe as well, 28%, and Asia and the rest of the world, 44%. We've also mentioned the three-year CAGRs, Why? Because it's probably the last time we'll mention them. Because three years ago, for that similar first half, that was just before COVID. That was July to December 2019, which was our 2020 fiscal year period. And if you look at our three-year KGARs, overall for Pernod Ricard, our top line three-year KGAR is 9%. somewhat above, by the way, the 4% to 7% framework behind our transform and accelerate strategy. And if you dwell into the regions, you'll see that the three-year KGAR in Americas is 9%, more recently driven by high single-digit pricing. If you look at Europe, the three-year KGAR is up 7%, by the way, which is very strong, driven more recently by low double-digit pricing. And finally, Asia, rest of the world, with a three-year KGAR of 9%, and more recently driven as well by low double-digit pricing. So broad-based growth coming from all regions, but also diversified growth across all spirit categories. I think here the important metric from my point of view is you have six categories, which is quite a lot, driving roughly 90% of the growth. You see here the Scotch category, which has grown 23% with low double-digit growth across the portfolio. You have Irish whiskey as well, growing 20% with low double-digit growth across the portfolio. Cognac and Brandy is growing 4%, driven as well with double-digit growth. Vodka has grown 16% with high single-digit growth, 7% on absolute, for instance. Gin, growing 15% with high single-digit growth on pricing. And finally, Seagram whiskeys growing 12%, so really diversified growth as well across all spirit segments. A quick mention on our specialty brands portfolio, which we've been nurturing quite carefully, which we've been building as well, in particular through M&A. That specialty brands portfolio doubled its weight in our business over the last three years, growing on average 22% per annum since pre-COVID levels. This last first half, that portfolio grew 14%, with some quite impressive growth numbers. Lillet up 43%, Malfi up 23%, Aberlauer up 15%. Red Breast 24 and so on and so forth. I think, again, that specialty brands portfolio, which was introduced in 2018 as a growth relay for Pernod Ricard, is most definitely delivering the results. Now, it's important to invest behind our brands. And as I was mentioning earlier on, we've accelerated our investments behind our brands, boosted as well by our digital transformation from an A&P point of view, its matrix. Just to mention, we've significantly accelerated A&P investments in the U.S. by above 200 basis points, in particular during the OND October, November, December period. festive season in the U.S. We've also increased our investments, marketing investments in Europe by 77 basis points. We've been quite agile in resource management, for instance, and we'll talk about it later. We've decreased our investments in China during the course of Q2, completely related to the COVID restrictions. If people are at home, it's Why invest in out-of-home advertising, for instance? So brand equity is absolutely clear. I mentioned matrix, but also from a pricing point of view, we've really, really improved our value conversion through some very strong revenue growth management initiatives, which have been boosted by Vista Rev Up, which is now being deployed. By the way, our premium plus portfolio, which represents more or less 80% of our business, has also delivered 80% of our growth. The rest coming principally from our Seagram whiskeys. From a pricing point of view, I think it's important to show how proactive we've been. So inflation kicked in at the end or towards the second half of our last fiscal year. And this is where you saw pricing increase to mid single digit for the second half of fiscal year 2022, from January to June 2022. Then in Q1, our pricing over July, August, September of 2022, pricing was up 7%. And finally, for this first half, from July all the way through to December, pricing is up 10% to compensate for inflation and, of course, maintain and protect our margins. Just a couple of examples, and I will not dwell into them, but Matrix is really driving efficiencies. And you see here the U.S. contribution of media to net sales increasing threefold thanks to our key digital marketing program, which means in some specific cases, if I take... ROI on Jameson media advertising up 40%. Likewise, our DSTAR key digital program, which is all about our sales force activation, you can see that it allows us to really focus on the outlets that really matter, where we can accelerate our market share gains. So this as well has boosted our performance over the first half. We continue to primamize our portfolio through innovation in particular. Here you have a number of examples. Through the acceleration of our prestige portfolio, I'll mention Royal Salute, which over the first half is up strong double digit, 37 if I'm not mistaken. And also through partnerships and acquisitions. If I mention our partnership with Sovereign Brands, Or more recently, as well, with Codigo Tequila, in both cases, increasing our footprint in the US market and in some pretty dynamic categories. Well, I couldn't present these results without having a special mention to our teams around the world. Behind these numbers, behind the quality of the financial performance of our group, while we have teams of women and men that are extremely highly engaged, that are working heavily day in, day out, across all functions to carry out and deploy our transformation to deliver these results. And I just wanted to pay a special tribute to them, to their extraordinary extremely high level of engagement and it's something that I feel very proud of. I believe I'm lucky to have amazing teams and we're here to invest behind them. It's very important. Of course, sustainability and responsibility is embedded in everything we do. You probably saw over the last few months the significant investments we're making behind some of our distilleries, because we have a vision, a clear vision, and we will achieve it, of a carbon-neutral future, in particular when it comes down to distillation. I could talk about the packaging of the future, about new initiatives regarding responsible consumption. I could have a focus, because this is going to happen this year, one exactly I don't know, the teams are working hard on that, but which is about the e-labeling, having QR codes on every single bottle in Pernod Ricard, which will give access to consumers around the world to everything they want to know on our brands. If we dive very quickly into our sales, starting with our must-win markets, USA up 5% for the first half. That's a three-year CAGR of 7%. We can qualify that first half of solid in a normalizing market with no surprise, as we mentioned during Q1. During COVID, the market was growing above its usual 4% to 5% rate. As it normalizes, we believe, by the way, the market currently trends around 3-ish, just like us, by the way, from a depletion standpoint. We've had and we've carried out some strong pricing across the portfolio in the first half. We intend to continue to do so in the second half, and we could underline the strong performance of Jameson and Jeffersons, but also the solid growth of Malibu, Kalua, and Beefeater, and the continued strong development of our RTD performance. As you can see, there's been a some phasing between 5% shipment and 3% depletion. Obviously, this will cross-correct during our third quarter. China up 4%, slightly as well boosted by a little bit of phasing ahead of Chinese New Year as always, but a good three-year CAGR up double-digit at 10%. We feel quite confident about the immediate future in China with China. the very welcomed lifting of COVID restrictions. Obviously, these COVID restrictions did impact us in our Q2 for China. So Q1 was a great Q1 driven by a very strong mid-October festival. But then Q2 was disrupted by the COVID restrictions. We've driven some very strong pricing across the whole portfolio in China. We are continuing to widen our market footprint with pretty strong growth of our growth relays. In particular, I think we can underline the very strong performance of the Glenlivet and Absolute. As I mentioned, H1 has been favorably enhanced by advanced shipments ahead of Chinese New Year, which frankly was soft. impacted by a low footfall because the lifting of the restrictions happened a little bit too late ahead of Chinese New Year. But as we can mention it here, we strongly anticipate good consumer optimism going forward, starting as of February, quite clearly. Global travel retail up 36%, pretty well on track to deliver exactly the same level of profit that travel retail delivered just before COVID. We are currently trending at 80% in terms of net sales versus pre-COVID levels. And again, strong pricing across all global travel retail, across all the portfolio, in particular across our Scotch portfolio. Finally, India, a 10% three-year CAGR. which grew 17% over the first half of this fiscal year, with continued premiumization momentum, obviously across our Seagram whiskeys with some mid-single-digit pricing, but also mix with acceleration on blender spread and rose stag at the expense of Imperial Blue. And finally as well, not to forget, the strong momentum of our strategic international brands, in particular Jameson, and our Scotch portfolio, and finally Absolute Vodka. Very briefly, of course, Europe, 7% three-year KGAR, which is, in my view, a very pleasant surprise. Up 6% over this first half, really excellent performance, with as well very strong pricing across the region. Modest growth in France, with particularly good momentum on Ricard, with great marketing initiatives behind the brand, where we're starting to see the returns. Double-digit growth in Spain, with the rebound on trade. Good growth in the UK on Sturtz, in particular on Absolute, Jamison, Malibu, and Martel. And finally, as well, good growth across all channels in Germany. In Americas, more generally speaking, which does include travel, retail, and the U.S., you see 7% over the first half, 9% CAGR, as I mentioned it, high single-digit growth in Canada, very strong growth in Brazil or as well in Mexico. And Asia, rest of the world, as I mentioned, up 18%, strong growth in Japan, very strong growth as well in Korea. a good rebound as well in Taiwan and, more generally speaking, Southeast Asia, and a continued very strong momentum in Turkey. I won't dive into this slide. You've already seen most of the numbers. Again, we do believe in the power of our premium brands portfolio and in the fact that the growth is really coming across all categories of our portfolio. From a brand's point of view, I think it's great to see Jameson up 19%. By the way, the three-year CAGR is up 14% on average every single year over the last three years. We could even go beyond. That's the most recent trend. So that, again, it's a broad-based growth with all key markets growing. And as well, innovation, which is doing pretty well, very well, in fact. Jameson Orange, part of that success, and Black Barrel, continued strong performance there. Strong pricing across the world as well, so very strong performance in the U.S., in Europe, in travel retail, across sub-Saharan Africa, in some Asian markets, in Latin America, and with a very strong campaign, which is currently being rolled out. Scotch portfolio up 23%, and you see the three-year CAGR up double a digit as well with particularly strong performance of Chivas. So you see Chivas up 34% over the first half. Royal Salute, I wasn't wrong, I remember. So up 37%, Royal Salute. Ballantyne's up 17%. Glen Levitt up 12%, perfectly in line with its ongoing momentum of On average, 12% growth every single year. Absolute 16% growth, of which seven is driven by pricing. Over the last three years, the brand has grown 8% per annum on average. The growth is broad-based, and despite a pretty high comparison basis across all markets, in fact, Western Europe is in double-digit growth. You see a strong development in LATAM, India, and China, a pretty solid rebound in travel retail like the rest of the portfolio, and stable depletions in the U.S. Mortel up 3%, 4% three-year CAGR, very strong pricing, perfectly in line with our value strategy. You see strong double-digit pricing in China. We had a great Q1, as I mentioned, driven by an exceptionally strong Mid-Autumn Festival, followed by quite a soft Q2, as I mentioned, due to COVID restrictions. GTR was impacted by COVID in Hainan, as you all know. H1 in the US was somewhat soft, but we see continued very strong development for Martel in Africa, Middle East, notably in Nigeria. and, of course, a rebound in China in the months to come, starting February. More generally, the rest of the brands you see here, beef feeder, Ricard, as I mentioned, great to see the momentum behind Ricard in France for the second year in a row ever since we came up with the new great campaign, born in Marseille, Ricard up 10%. I won't go more into detail there. And I think it's now time for me to pass the baton to Hélène.