Pernod Ricard S A

We're delighted to welcome you to our FY25 sales and results call. Alex and Hélène will take you through the presentation before we open for your questions. Alex, over to you.

Well, thank you very much and good morning to all of you and I do hope you had a nice and enjoyable summer. So welcome to our fiscal year 25 sales and results and let's dive into them directly. Well, first of all, the title is a pretty clear reflection of the mindset of Pernod Ricard, of all the teams in Pernod Ricard. Steering through a challenging environment with agility, with discipline, and more importantly so, with strategic conviction. And at the end of the day, this has delivered organic margin expansion. We have kept on investing behind our brands and their desirability, and investing for the long-term growth of Pernod Ricard. Our net sales are down 3% organically and minus 6% in reported terms, basically impacted by currency impacts. What I believe is very important is the continued volume recovery at plus 2% for the full fiscal year with the third consecutive semester of volume growth. So volume has resumed and is confirmed for the third consecutive semester. Declines in China, USA and GTR Asia, which we'll get back to in detail later, have negatively impacted our mix. And the rest of the world has been resilient in many, many markets where we have been gaining or maintaining our share in most of them. from a profit from recurring operations down slightly better than minus 1% organically and minus 5% from a reported point of view. We have completed 900 million euros of operational efficiencies or efficiency program. This year we've concluded that one. and have kept on having a very strong cost discipline. This has led to very strong organic operating margin expansion, up 64%, and by the way, up 6% from a reported point of view, and this despite significant adverse currency impacts. We have focused on free cash flow, which is now at 1,133,000,000 euros, up 18%, with strong operating working capital management leading to strong improvement in our cash conversion. We have invested in CAPEX and strategic inventories to prepare the future growth of Pernod Ricard, but at 1.2 billion, which has passed the peak of fiscal year 24, as we had announced, by the way, in last February. We have continued the dynamic management of our portfolio, including the closing of the disposal of our wine business and the announcement of the disposal to come of our imperial blue business in India. And finally, we are proposing a dividend of €4.70 per share, which is stable versus last year. I will not dwell upon these numbers, which Hélène will get back to in detail in a few minutes from now. So our broad-based and balanced geographic footprint has definitely helped us mitigate the impact of the sharp declines in both China and travel retail Asia and the softness in the U.S. America is excluding U.S.A. is up 2%. Europe excluding Russia is flat. And by the way, this is the final time you'll hear us talk about this. now that the exit in Russia has been fully lapped. And finally, excluding China, the rest of the world and Asia is up 3%. Beyond our balanced geographical footprint, there's also a diversified portfolio that has posted strong performances across all regions, with, for example, Jameson, which is now above 11 million cases, that has grown organically by 3%. I will only mention, by the way, amongst all these examples, the first line, strong double-digit growth in India, where Jameson, this past fiscal year, has now become the number one imported bottled-in origins per brand in India. Absolute up 2% in terms of net sales above 12 million cases with good growth in many parts of the world. Good performance as well of Chivas up 2% led by the premium part of the portfolio and clearly by Turkey where we experienced double digit growth. but not only Turkey, Latin America, Poland, to take a few examples. Very strong growth for Kahlua, up 7%, led by the US. Valentine's has been flat. And finally, just one word on bamboo, huge, huge success, now above half a million cases, with double-digit growth more or less everywhere, globally posting a 24% growth, And bamboo has now become globally, and that's official, the number one super premium rum. So I mentioned it, three consecutive semesters of volume growth. I think it's a good idea to update this chart, which we started sharing with all of you last February, just to show the pre-COVID type of volume growth we had. Then the impact of COVID, where over two semesters, We were down 12%. The post-COVID revenge conviviality in a way rebound where we had four semesters, not two, but four of plus 12%. The normalization and what we now qualify as the recovery. As I mentioned in my introduction, while basically gaining share or maintaining share in the majority of our markets, we've mapped them out here. So basically we are gaining or maintaining our share In 12 of our 17 top markets, the way we qualify our markets at Bernard Ricard is we have the G18, which are the 18 largest markets in terms of sales and profits. Out of these, there's GTR, which is not a market per se. Then our top 17, you have 12, where we're gaining or maintaining our share. And by the way, we are closing our performance gap in the U.S., Innovations and marketing investments are driving long term sustainable brand equity. We measure brand equity on a consistent basis many times a year, at the very least quarterly, if not in some cases even monthly. Innovation is really kicking off big time in terms of scaled innovation for Pernod Ricard. We've mentioned a few successful launches in the past fiscal year around our ready to drink business. We gave one example with Absolute Ocean Spray as well with a couple of innovations around Kahlua, with innovations around non-ALC propositions, with here you see Ramadzati Rancher Zero, which is expected to, which is already has become the number two non-ALC brand in Germany and many more innovations over the past fiscal year. I think it's important as well to stress our current innovation pipeline and innovations expected for our current fiscal year. I can help but start with the Ricard RTD in France, which, by the way, Good news or bad news depends on which side of the fence you're sitting, but is out of stock. Jefferson's rye, which was launched, I think, in May, so which comes into full effect in terms of distribution and activation this fiscal year. The current launch, as we speak, of Kahlua Duncan, the launch in a couple weeks from now of the screwball Tin Can, the launch which is due to happen as we speak as well within the next few days or a couple weeks of a new range in India called Exclamation, A lunch expected for very early calendar year 2026 around our ready to drink business, which is very dynamic with Malibu Dole and a few other lunches expected. to innovations which are expected for the second half of this fiscal year, which we cannot disclose as of yet, unfortunately, but which we are very much looking forward to. Speaking of Malibu Dole, I think there's a nice little video that introduces it. great well it's a little bit early uh but but um it's the right spirit um so uh we've continued to deliver uh sustainable growth throughout our value train as a chain and here uh there is strong progress on our 2030 uh good times from a good place uh road map uh so Very specific topics which we monitor on a regular basis, so very strong progress on that front. So, a quick update on sales. To start with, our largest market, which is roughly 20% of our business, USA, organically down 6%, top line. The market, the spirits market, which includes RTDs, is in slight growth. far below its traditional average mid-single-digit growth, but still in slight growth, impacted by, let's be clear, subdued consumer confidence and economic moderation. And PR USA is narrowing the gap to market through very sharp execution. So, solid volume and value gap to market continues to narrow, and it is a direct consequence of the execution I mentioned. and strong investment behind the brands we expect that gap to keep on narrowing and accelerated by the way by the innovations i just mentioned a few in the previous uh slide by the way jameson is back in green territory based on the latest panels, including yesterday's panel from NAPCA. But Absolute and Kulu as well are performing clearly above their competitive set. We finalized the revisit of our route to market over the summer, so we now have brand new agreements. with our distributor partners across the US, and they were designed to align us and increase our executional capabilities. Of course, no need to mention the prolonged tariff uncertainty, which has impacted distributor inventory, as we had already mentioned during our Q3 communication messages. So this has impacted distributor inventory levels at year end. And these adjustments are expected to take place throughout fiscal year 26, particularly skewed towards the Q1. India, which is now 13% of our global business, which is now our second largest market, with organic net sales up 6%, by the way, plus 8% with the exclusion of Imperial Blue, which, as I mentioned, We announced the disposal of Imperial Blue, which is a great brand, by the way, but no longer had a strategic fit in our portfolio. of brands from a profitability point of view and from a growth point of view. So that disposal is expected to be immediately accretive to both our margins and growth in India. The underlying consumer demand is still very strong in India and the premiumization trends are still very dynamic. I think it's important to mention here the excise policy changes in Maastricht where they increased by 50%, 5-0, which will impact negatively our sales throughout the year, which will still be very nicely growing, but that impact is skewed most significantly towards Q1. Moving on to China, which is now our third largest market, representing basically 8% of our business with organic net sales, unfortunately, but as expected, down 21%. This is basically the macroeconomic environment, which is still challenging. and still continuing to impact the consumer sentiment, which is weak and therefore very soft demand. So decline in sales in Martel and our Scotch brands, but our premium brands portfolio is still growing very strongly. We are starting to see developing consumer awareness for the Chouin. which we inaugurated five years ago, so think about it, about the whisky which is now in barrel for five years, so getting to the right level. We're keeping seeing increasing penetration of premium spirits among the growing middle class in China, and again, a soft consumer demand in Q4, combined with anticipation of the conclusion of the anti-dumping investigation, by the way, which lasted exactly 18 months, which came to an end based on an agreement, a mutually agreed agreement, but which came into effect on July 5th, so five days after the closing of our fiscal year. So this will lead to distributor inventory overhang at the year end and therefore some degree of adjustment in Q1, where we expect strong decline in China. Global travel retail down 13%, basically impacted as well by the prohibition of sales of cognac duty-free in China, which came into effect December 6th and ended July, at the beginning of July. We do expect GTR to return to growth in fiscal year 26. GTR Asia will still be impacted in our first quarter as our duty-free operators resume sales and are replenishing their shelves leveraging their warehouses and will start shipping in the coming months and is hewed towards resuming in Q2. Rest of the world, so the regions, Europe net sales down 2%. Quite a resilient Europe, to be fair, with dynamic sales in Eastern Europe and contrasted Western Europe with good growth in France and declines, offset by declines in Germany and Spain, which is exactly the reverse of the previous year. We're gaining market share in France. We're getting market share in Germany. We're maintaining our share in the UK, driven principally by the on-trade and very good brand performances across the portfolio, particularly Bamboo, Jameson, Chivas, Bahntines, PJ, Altos to name but a few Americas, down 3% with good growth in Canada, good growth in Brazil, gaining growth in Brazil and Mexico. Asia, rest of the world, down 4%, which includes China, but with very good, strong performance in Japan, which has grown 6%, gaining share, particularly in champagne, but globally, and led also by our whisky brands. Very strong growth as well in Africa, principally Turkey and South Africa, where we're gaining share as well. And finally, not to forget Australia, where we have experienced good growth and where we are gaining share as well. And now to the financial update with Hélène.

Thank you. Thank you, Alex. Good morning, everyone. So let's deep dive into the financial performance, starting with the operating margin trajectory, which is strongly expanding from an organic point of view. Despite the top line and decline, we sustained brand building investments and a very strong discipline on cost. Yet again, another year, we have delivered margin expansion, which is a core element of our ambition. We have reacted with agility to the challenging conditions with sharp resource allocation to maximize growth opportunities and very strong discipline. leading to profit and recurring operations being broadly stable organically at minus 0.8%. Gross margin is impacted by negative market mix, notably the impact of decline in the US, China and Asia travel retail, while benefiting from our COGS efficiency programme. Investing behind our brand is a paramount element. As such, A&P is consistently in our range of circa 16% to net sales, with further increased focus on the return on spend thanks to our digital tools. A very notable reduction in structure costs, organically by minus 4%, which illustrates the very strict discipline and improvement we continue to supply throughout the organization. Reported operating margin was sustained despite negative FX impact of 112 million euros and a negative parameter impact of 29 million euros, mainly linked to brand disposals. To note that the brand disposals are accretive to the margin, we will address it in more details later in the presentation. So maybe let's deep dive on the efficiency initiatives. I'm sure you recognise that slide, which we shared in February. There is some update and some granular, I would say, as well, efficiency by nature that we are very happy to share with you today. So we have successfully completed this phase of our programme of Feed for Future and Operational Efficiencies. which I'm happy to remind you represent 900 million efficiencies delivered between 2023 and fiscal year 2025, half of which in fiscal year 2025. Efficiency concerns principally COGS and cash savings, especially finished goods inventory reduction. Of those efficiencies, two-thirds, or circa 600 billion, are from operation contribution, and the remaining one-third, circa 300 million, from structure, supported by a circa 12% reduction in SG&A headcount. Starting with operational efficiencies, many details on the slide, but they concern three main areas. Procurement, where the majority of efficiencies are delivered, production, and supply. One illustrative example is the short- and deep-sea tenders, which are to allow us to significantly optimize those associated costs. On the structural cost efficiency, we want to ensure that we are running a consistent, sustainable, fit-for-purpose organization with very strict discipline and as well adapting to the changing market circumstances while prioritizing customer-facing roles and activities and without undermining business development program. Still more to come on the efficiency front as it is an ongoing initiative. I will touch on it later in the presentation. Let's move now to the earning per share, down at minus 8% due to lower reported profit from recurring operation. This is mainly linked to negative translation effects, increased recurring financial expense as we continue to refinance very low interest maturing debt at current interest rates, which are more elevated, partially offset by a reduced income tax on recurring operations in line with a reduction in profit from recurring operation. Group share of net profit increased by 10% as non-recurring costs are significantly lower than fiscal year 24. Non-recurring costs are mainly due to restructuring and are lapping last year wine business impairments and the reversal of Kahlua impairment. Cash now, so strong focus on cash generation, obviously, during the year, which has delivered an improvement of the free cash flow of 170 million euro, leading to a free cash flow of 1.1 billion euro, with strong improvement in all elements in operating working capital, notably finished good inventory optimization as part of our efficiency initiatives. Moving now, zooming on the strategic investments, starting with CAPEX. CAPEX investment coming off their peak, as announced, remaining our number one financial policy priority. So the amount of CAPEX spent has been €656 million in fiscal year 25, in reduction by €110 million versus your previous year, with investments notably in capacity expansion programs initiated in previous years. Similarly, with strategic inventories at 557 million euro, which is 88 million euro lower than last year, given less significant cash out, also coming at their peak from fiscal year 24. As you know, CAPEX and strategic stock investment are key to secure long-term growth. Moving to the balance sheet, so we finished the year with closing net debt of €10.7 billion, which was €300 million lower than at the start of the year, due to again strict discipline applied to operating working capital, positive contribution for M&A and favourable currency impact on US dollar debt, which represents 31% of our net debt. Given the lower reported EBITDA year-on-year, our leverage ratio increased to 3.3 times ahead of where we ended in the prior fiscal year. Subject to shareholder meeting approval and in line with our financial policy, we propose a stable dividend per share of €4.70 per share. Back to you, Alex, for the strategic update.