Pernod Ricard S A

We're very pleased to welcome you today to our Q1 FY25 sales call. I'm joined today by Hélène de Tissot, our group CFO. I guess you all have seen a press release on our website. And so before moving into questions, Hélène will say a few opening remarks. Then we'll move into questions. And as every time, we will remind you to ask only two questions for callers so that everyone has an opportunity to have their questions posted. Thank you.

Thank you, Florence, and good morning, everyone. Thank you for joining our fiscal year 25 Q1 sales call. So we are reporting today a minus 5.9% decline in organic net sales for the first quarter, which is minus 8.5% reported. Excluding Russia, the organic sales decline is at minus 5%. As we have previously flagged, the slow start to the year was expected, notably within the U.S. and in China. together which, when combined, accounts for circa 50% of our annual sales footprint. And with both markets facing challenges, those are quite different reasons. The quarterly sales result is softer than we previously anticipated, as the weakness in China is greater and is also affecting Asia for the retail. India, where the underlying growth is strong, faced sales phasing, which are expected to fully reverse in Q2. market in Europe and adverse weather conditions over the summer. As you know, our broad geographic base is a core strength, and there are a number of markets where we can collaborate with strong performances in each of our regions, including Japan, Canada, Poland, Brazil, Turkey, and Nigeria, as well as strong travel retail performances in America and Europe. We achieved market share gains in over 70% of our main markets, including in China, in India in the segments of the market we operate in, in France, in Spain in the off-trade, in Germany, in the UK in the on-trade, in Poland, in Brazil, in Canada, and in Australia. The list can go on. Overall volumes are stable. Price makes FX of minus 6%. in a moderated pricing environment and with a negative market mix, notably due to the performance in U.S. and China. Naturally, given the challenging environment and our expectation to sustain our operating margin, we are consolidating and expanding on the efficiency efforts that last year contributed to our strong margin expansion. Operational efficiencies are including production efficiency initiatives as well in marketing with a focus on continuously improving return on investment, particularly leveraging the key digital programs, and across the business, a very strict cost discipline with an evolving fit-for-purpose organization. These efficiencies are, I must say, at the forefront of my priorities as Group CFO. Our motto is agility and discipline. So let's deep dive into the net sales performance by market, starting with our must-win markets. USA, minus 10%. Market sell-out continues to normalize, currently running at circa plus 1%. We welcome the start of an easing in the rate cycle, which will be positive for consumers and customers, though it may take some time before the beneficial effects become visible. Pernod Ricard sell-out declined in Q1 at circa minus 5%. which is slightly better than Q4. And Jensen is broadly in line with its competitive sets, and momentum is improving. Our net sales in the U.S. were impacted with inventory adjustments, as expected, with retailers continuing to tightly manage their stock level and promotion intensity remains strong. Wholesale inventory is in line with the historical level in terms of volumes, while value is down a bit. In support of Q2 festive season, we have a strong marketing activation program planned. And for the full year, we expect to see a gradual improvement in our sell-out performance. Moving to India, plus 2%, so solid sales growth, though impacted by phasing. And again, this impact is expected to fully reverse in Q2. With double-digit growth on Jensen and our C-gram whiskeys, Royal Stag and Venice Drive. Underlying sell-outs are strong, with the market continuing to enjoy dynamic consumer fundamentals. We are performing ahead of the industry, consolidating our leadership position, and strong growth is expected for India for the full year. China, minus 26%. Sharp sales decline in a challenging macroeconomic environment with soft consumer demand over the summer and into the mid-autumn festival, which is expected to be weak. We see net sales decline on Martel, Cognac, and Scotch, while the depletions are growing strongly on premium brands, including Jemison, Beefeater, Kahlua, and Olmeca. Actions are being taken to mitigate the impact of the group's performance, caused both by the weak macro environments and by the implementation of the preliminary tariffs on Martel, which are technically duty deposits. We expect to see a more significant full-year decline than last year due to the very weak consumer demand. Global solar retail, plus 3%. Strong growth in all regions except Asia. We put growth for Absolute, Jensen, and Valentine's. We can expect for the full year to see continuing strong growth in regions outside Asia. Asia reserves the world, so the organic sales growth is at minus 8%. We had a good performance in Japan, continuing weakness in Korea, and a decline in Taiwan, which is a result of saving. Moving to Europe now. Markets in Europe are resilient, with the organic sales growth at minus 3%, but which is plus 1% excluding Russia. A little slower than expected, with Western European markets in particular impacted by adverse weather during the summer. Latin America, organic sales growth of plus 3%, So a strong result in Brazil, lapping favorable comparison basis and stabilized market environments, with a decline in Mexico, which faced a weak tourist summer season. And North America saw a strong start of the year in Canada. For the full year, for fiscal year 2025, the global environment remains challenging. We expect organic net sales back to growth, albeit probably modest growth, given the ongoing consumer demand weakness in China. We expect to sustain organic operating margin. We are deploying our resources with agility and adapting our fit-for-purpose organization. We retain our focus on the delivery of operational efficiencies along with strict cost discipline. We aim to maximize value creation while maintaining consistent investment behind our brands with A&P ratios to net sales expected at circa 16%. We remain confident in the attractiveness of the spirits market and in the long-term demographic and consumer trend tailwind, which allows us to reiterate our confidence in our medium-term financial framework. That concludes my opening comments. And now, Florence, we can open the line for questions.

Thank you, Hélène. So now the line is open for questions. A quick reminder, two questions maximum per caller, please.