Pernod Ricard Reports a 5.9% Decline in First Half of 2025/26

Revenue and Geographic Performance

First-half revenue amounted to 5,253 million euros, down 5.9% organically and 14.9% in reported terms. This contraction reflects an unfavorable currency impact of 356 million euros, mainly due to the weakness of the US dollar, Indian rupee, and Turkish lira, as well as a negative scope effect of 217 million euros resulting from brand divestitures. Geographically, the United States saw a decline of 15%, while China plummeted by 28%, affected by a tougher regulatory environment and weak consumer confidence. On the other hand, several regions showed a more favorable trajectory in the second quarter, with notable improvements in Global Travel Retail and acceleration in India, where the group recorded 4% growth (8% excluding the divestiture of Imperial Blue). Stock adjustments weighed on overall performance, a phenomenon expected for the entire fiscal year. Among key markets, Canada showed solid growth, Turkey maintained very strong performance, while Brazil and Mexico fell in a challenging macroeconomic context. In Europe, the continent registered a slight decline of 3%, with minor contractions in France and declines in Germany and Spain, while the United Kingdom showed signs of stabilization.

Operating Results and Financial Performance

Current Operating Income (COI) for the first half stood at 1,614 million euros, down organically by 7.5% and 18.7% in reported terms. The gross margin fell by 216 basis points organically, penalized by a slightly negative price and mix effect of around 50 basis points, tariff increases of about 70 basis points in the United States and China, and a net increase in costs driven by inflation in agricultural raw materials. The operating margin came to 30.7%, contracting organically by 55 basis points. However, the group achieved a significant reduction in structural costs by 10%, thanks to the implementation of its Fit For Future operational model. Free Cash Flow increased by 9.5% to 482 million euros, improving the conversion of COI into cash despite the decline in operating income, thanks to the normalization of strategic investments and disciplined management of working capital requirements. The group's current net income attributable to shareholders fell by 20% to 1,018 million euros, reflecting the optimization of financial costs, with an average cost of debt improving from 3.4% to 3.2%. Earnings per share decreased by 20% to 4.04 euros.

Outlook for Fiscal Year 2025/26

For the fiscal year 2025/26, Pernod Ricard reaffirms that this year will be a transition year with an improvement in organic revenue trends in the second half. The group continues the execution of its operational efficiency program of 1 billion euros for the period 2025/26 to 2028/29, with a third expected to be achieved this year. The ratio of advertising and promotional expenses will be maintained at approximately 16%, while strategic investments are revised to around 750 million euros. Over the medium term (2026/27 to 2028/29), Pernod Ricard anticipates organic revenue growth of between 3% and 6% per year on average, supported by an increase in organic operating margin. The group aims for a cash conversion of about 80% and beyond from the fiscal year 2025/26, with a normalization of strategic investments capped at around 800 million euros per year.