Pernod Ricard S A

Hello, everyone, and welcome to our Q3 FY25 sales calls. I guess you've all seen the press release this morning. Hélène de Tissot, our Group CFO, will provide a brief opening comment before we move to your questions. To allow everyone to ask a question, please ensure you have two question maximums for Hélène. Thank you. Hélène, over to you.

Thank you, Florence, and good morning, everyone. Thank you for joining this Q3 sales call. We report a resilient performance with organic materials minus 3% in Q3, minus 3% reported, and year-to-date minus 4%, organic minus 5% reported. Volumes are growing year-to-date at plus 1%. Price mix is minus 5%, primarily caused by strongly negative market mix effect. Note that there are some phasing technicalities impacting Q3 that will reverse in Q4. In India, to start with, the implementation of new automated customs clearance procedures that has delayed the clearance of our imported brands, and a temporary production interruption in a third-party production facility in one major state, which is now resolved. Second technicalities, global travel retail. In addition to the impact of the suspension of cognac in duty-free, the quarter is impacted by cycling a very high compression basis. Then the third technicality, which is impacting a number of markets, especially in Europe, is the later date of Easter, with Easter Sunday falling on April 24, which is three weeks later than last year. The global macroeconomic and geopolitical environment remains challenging and very fluid as regards to tariffs. Our balanced and both-based geographic breadth and our diversified portfolio remains key in mitigating some of the impacts caused by the environment. While three out of four of our must-win markets are significantly down, the rest of the world, accounting for two-thirds of sales, is in growth. As explained in our H1 results, we are actively managing what is within our control as we adapt to these challenging circumstances. We are continuously adapting our resources with agility, deploying our efficiency program, and steering the organization to fuel our future growth and optimizing our cash generation. For fiscal year 2025, we are confirming our outlook of low single-digit decline in organic made sales while sustaining our organic operating margin. I am confident in sustaining our organic operating margin given the progress we are making in operational efficiencies. which is our ongoing process of continuously improving both how we operate and how we are organized. I emphasize that this outlook incorporates the expected tariffs based on the information we have today. At H1 communication, we explained that our outlook was predicated on a tariff scenario with a good analyzed risk of circa 200 million euro, with circa 140 million euro in China, and circa 60 million euros in the U.S. This risk scenario remains in line with current tariff situation, i.e. 10% baseline tariffs and including 20% reciprocal tariffs on the EU. E&P will be maintained at circa 16% of net sales and strict discipline applied to structure costs. Maximizing cash generation remains a core focus for the group. Regarding foreign currencies, At H1, we reported a negative FX impact of 110 million euros on profit from recurring operations, and that we expected this FX to be positive over H2, leading to an improvement for the full year versus H1. The US dollar and emerging market currencies have subsequently weakened, and based on current spot rates, we can expect FX to be broadly neutral in H2, and for full year, FX impact to be broadly in line with H1 at profit from recurring operation level. Turning now to our performance in our markets. So on sales performance, starting with the U.S., net sales Q3 at 2% year-to-date, minus 5%. So the U.S. period market remains totally stable. Q3 organic net sales are ahead of sell-out and were supported by wholesalers' orders ahead of established announcements. Our set-up gap to market continues to reduce on both value and volume. This improvement, in particular with Jameson, Absolute, and Kahlua, reflects our ongoing focus on execution, with actions being taken on pricing, commercial excellence, and marketing excellence. For example, reinforcing our own trade brand advocacy team and developing partnerships and collaborations that ensure cultural relevance for our brands through media, sponsorship, and product innovation. I can mention Malibu Media, featuring actor Brian Cox, Jameson's sponsorship of Major League Soccer, and Kahlua Chocolate Chips launch. Overall, for the U.S., we remain confident in the recovery of the market, convinced that the current challenges are primarily cyclical in nature, and we expect to see continuing gradual improvements in our seller performance. Moving to China, net sales Q3 minus 5%, year-to-date minus 22%. The macro context remains challenging. We see sharp declines on Martel, and as expected, CNY was very soft, with significant declines in gifting. We are delivering very strong growth on premium brands, with Absolute, Allmaker, and Jensen, and Q3 sales benefit from cycling a favorable comparison basis. We've been taking price from Artel at the level of missing all digits in February. Moving now to India, net sales to three plus 1%, year-to-date plus 5%. Board-based growth year-to-date with strong underlying market demand and continuing premiumization trends. We are delivering a softer Q4 due to phasing, caused in part by the implementation of the new custom clearance procedure impacting imported spirits. and also a temporary production interruption in a third-party production site in a major state which interrupted sales of domestic spirits and which is now resolved. We see continuing strong growth, let's say very strong growth, of Chimpsons, Ballantines, and Royal Salutes, good growth on C1 whiskeys, notably Royal Style. So we are expecting a strong momentum in Q4, which includes catch-ups on Q3. Global travel retail, next year's Q3, minus 31%. Yesterday, it's minus 17%. As expected, sharp decline in travel retail, driven by suspension of the duty-free regime from cognac in China travel retail. And with a very high comparison basis, Q3 last year, again, was at plus 38%. Europe travel retail continues to grow. The Americas continue to enjoy good traveler numbers and growth from cruisers. In other markets, Europe continues to demonstrate overall resilience, with growth in France and UK, offset by ongoing macroeconomic-driven decline in Germany, as well as high comp basis in Germany last year of 36%, and the impact in Spain from the later Easter timing, which is impacting as well other markets like UK and Germany. In Asia, Japan is in good growth year-to-date, though Q3 impacted by high comparison basis. In America, Brazil enjoyed good growth with favorable comparison basis and consumer demand recovery, and Canada enjoyed good growth year-to-date. And in Middle East and Africa, we are having strong growth in Turkey and in South Africa. That concludes my opening comments, and now 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 touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. First question is from Andrea Pistacchi, Bank of America. Please go ahead.