Pernod Ricard S A

Welcome, everyone, and good morning. So we're very pleased with Hélène to welcome you to our Q3 FY24 sales calls. Hélène, you're going to start with a few opening remarks, and then we're going to jump straight into Q&A. For the Q&A, I would remind you that we would like to take only two questions per caller, so that you all will have an opportunity to ask your questions.

Hélène, over to you. Thank you, Florence. Good morning. Good morning, all, and thanks for joining this Q3 sales call today. So I guess you've been reading the press release published on our website this morning. Today, we are reporting a robust performance for the first nine months. We've been improving momentum at Q3 with organic net sales stable. Organic net sales for the first nine months are at minus 2%. I'm pleased to highlight that volumes in Q3 are back in growth at circa plus 1%, which is a strong positive signal after four consecutive trimesters of decline. This includes, by the way, growth on our strategic international brand also at plus 1%. The strength of our diversified premium international portfolio and our broad geographical footprint, balanced across regions and between mature and emerging markets, enabled us to largely offset contractions, albeit for very different reasons, in the U.S. and in China. Our performance year-to-date is robust, as we have now exited post-COVID super cycle in most markets, with normalization now largely completed outside the U.S. So please allow me to first highlight some performance in some of our key markets, beginning with India, one of our most win markets, as you know. So as indicated at H1, we expected to see an acceleration in momentum, and that is what we report today, with India growth of plus 8% in Q3, leading to plus 5% year-to-date. So growth is strong, growth-based, and accelerating with a continual demand for spirits, with continued and sustainable trends towards premiumization, and an overall strong performance of our strategic international brands, like Jameson, Absolute, and Debenivet, but as well on our Indian whiskeys. Moving now to our second mystery market, global flower retail, which is also improving, with a strong growth for the portfolio, notably Jensen, Martel, and of course, Repertoire, sustained by an improving sell-out momentum. So Global Carrier Retail is growing 5% year-to-date and enjoyed a very strong Q3 at plus 39%, with this Q3 growth amplified by phasing, which is both a catch-up on H1, you remember we were highlighting negative phasing in H1, and selling ahead of Q4, So Q4 will be as well lapping the quite elevated comparison basis. We have as well enjoyed strong growth yesterday in a number of other markets, notably Japan, Germany, and Turkey, and an accelerating performance in Q3 in Spain, Brazil, and South Africa. Europe is proving particularly resilient at plus 1% today and plus 4% in Q3 through Russia. This is driven by strong growth in Germany, Poland, and as well broadly stable in markets like Spain and France. Asia and the rest of the world, excluding China, is particularly dynamic. Very strong growth in India and global travel retail, as I just mentioned, and in Japan and Taiwan. Africa and the Middle East continues to deliver a very good performance, notably Turkey, where the performance of Shibas, Valentines, but as well Omeka is outstanding. and in South Africa and Nigeria, in particular with Mattel and Jensen. So let's move now to U.S. and China, two of our most win markets that have contracted this year, all these for very different reasons, I must say. So the U.S. first. We have reported an Excel of minus 8%. Starting with our sell-out performance, the nine-month sell-out performance is rather stable, that is the H1 sell-out at circa minus 3%. Our ambition to accelerate sequentially is taking a bit longer in the current context, and this is because the market is experiencing very aggressive price promotions after the first OMG. We are addressing this through our agile and data-led revenue growth management, supported by our key digital program, Vista Revit, ensuring that we protect the long-term strong equity of our brands. We have as well accelerated our activations, notably on Jensen, which has enjoyed the highest marketing investment ever made by Panerical USA, the head of St. Patrick's Day, but has also shown activation on our newly applied brands, namely Jefferson, Codigo, and Trubo. The market continues to normalize, with the consumer demand remaining resilient, currently at CECA plus 1 to plus 2%, though below its normal long-term growth rate. So with regard to our net sales in the U.S., They continue to be impacted by ongoing inventory adjustments, as you know, mainly at retailer level in H1, and starting in H2 more so at the wholesaler level. We are closely monitoring inventory levels together with our wholesalers, and we expect inventory adjustments to continue over the coming months and into fiscal year 45. In China, where we enjoy a strong leadership position, our performance both to date and into free reflects the challenging macro-environment, which is negatively impacting consumer sentiments. This has led to a weak CNY, with some down-trading, although depletion volumes grew. The performance of Martin & Oblige is solid, and our premium brands Jensen, Absolute, Olmeca, and Beefeater are as well enjoying strong growth. Given Q4 is traditionally a small quarter, And in addition, we are facing innovative outcomes this year in Q4. Performance in China for the full year can be expected to be quite similar to the year-to-date performance. So looking at the full year for this year, 2024, and why the environment remains challenging, we are confident in delivering dynamic Q4 next year, improving that is nine months, and leading to next year's growth, broadly stable for the full year, as already mentioned in February for our H1 presentation. We have confidence in the positive momentum for Q4, as in most markets, we have exceeded the post-COVID super cycle, which provided a difficult comprehensive basis. Normalization is largely completed outside the U.S., and our return to volume growth in Q3 is an encouraging signal. We are lapping last year price increases, with those new prices now anchored in the marketplace and in the mind of the consumer. This accelerating momentum is visible already in Q3 in many markets, and I mentioned them a minute ago, and is expected to continue. Let me as well highlight the efforts on brand activation in our markets, supported by consistent A&P investments and leveraging our key digital programs for improving effectiveness. We expect to deliver organic operating margin expansion in 2024 as we continue to focus on real-world management and operational efficiencies with E&P at circa 16% of net sale and disciplined investment in structure. I use the opportunity of our quarterly sales updates to pre-size our organic profit from return on operation variance at circa plus 1%. We remain very confident in the attractiveness of the global premium international spirits market and in the long-term demographic and consumer trend tailwind that sustains demand. That concludes my opening comments. And now, Florence, I think we can open the line for questions.

Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone with a question may press star and one at this time. The first question is from Andrea Pistacchi with Bank of America.