October 19, 2017 / 10:36 AM / in a year

UPDATE 2-Pernod Ricard beats expectations as China rebound accelerates

* First-quarter like-for-like sales up 5.7 pct

* Sales in China jump by 15 pct

* Indian and French markets remain challenging

* Reiterates 2017/18 profit growth forecast

* Shares hit record high (Adds CEO, CFO comments, analyst, shares)

By Dominique Vidalon

PARIS, Oct 19 (Reuters) - Pernod Ricard posted a stronger than expected jump in first-quarter underlying sales, helped by accelerating Chinese demand for its high-margin Martell cognac and its Chivas whisky.

Demand remained robust in the French group's main U.S. market, where sales of Jameson Irish whiskey continued to grow at a double-digit rate while travel retail sales gathered pace, lifting its shares to record highs.

Though the owner of Mumm champagne and Absolut vodka said some markets remained challenging, the company reiterated its forecast for a 3-5 percent rise in full-year profit from recurring operations after last year's 3.3 percent growth.

Pernod, the world's second-biggest spirits group behind Britain's Diageo, reported like-for-like sales up 5.7 percent to 2.29 billion euros ($2.71 billion) for the three months to Sept. 30, compared with analyst expectations of 3.4 percent growth.

Shares in the company rose 3.1 percent to 126 euros by 1057 GMT, the leading gainer on the CAC-40 index of French blue chips, having touched a record high of 126.10 euros.

"Q1'18 sales beat, good start to the fiscal year," Liberum analysts wrote.

In other markets, Pernod said disruption from a ban on alcohol sales near highways in India, its second largest market, continued to weigh on sales but that this is now easing off.

Sales in India rose 2 percent in the quarter, having previously slowed to 1 percent growth in its past financial year from 12 percent in 2015/16.

In China, sales of cognac and other luxury goods fell across the board after a government crackdown on corruption in 2014, hurting all spirits makers.


However, demand in China, which accounts for 9 percent of group sales, has been rebounding for several quarters and Pernod Ricard delivered growth of 2 percent there last year.

That leapt to 15 percent in the first quarter, led by demand for Martell cognac, but also for brands such as Ballantine's scotch and Absolut vodka.

Chivas whisky ended five years of declining sales in China after promotional investment and the launch of Chivas Extra 12, a brand dedicated to the Chinese market, though it cautioned that a later Chinese New Year in 2018 would hit second-quarter returns.

CEO Alexandre Ricard told Reuters it would be premature to extrapolate the strong first-quarter performance in China to the full year but expressed confidence that it would exceed last year's 2 percent growth.

Finance chief Gilles Bogaert told analysts: "We have guided for high-single-digit sales growth in China mid-term. This quarter shows we are getting there."

In the United States, sales were up 4 percent, driven by double-digit growth for Jameson whiskey, though Absolut vodka remained in decline in a competitive environment.

France, which accounts for about 8 percent of group sales, remained a weak spot, with sales falling by 4 percent.

Bogaert said the company could face a tough year in its home market as it contends with a deflationary environment that has affected all consumer goods companies in France. ($1 = 0.8473 euros) (Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta and David Goodman)

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