The COVID-19 pandemic has had significant repercussions on the activity of the Pernod Ricard group, which updated and shared yesterday Monday its new hypotheses and the resulting financial impacts. The wine and spirits group anticipates an internal decrease in current operating profit for the 2019/20 financial year of around 20%.
The target communicated by the group to the market on August 29, 2019 of organic growth in Current Operating Income between + 5% and + 7% had been revised on February 13, 2020, reflecting the initial COVID-19 assumptions, with organic growth Current Operating Income between + 2% and + 4%.
However, the combined impact of these different scenarios will result in “an internal decrease in Current Operating Income for the 2019/20 financial year of around -20%,” management warned in a statement released on Monday March 23.
According to the revisions to COVID-19 assumptions and its impact on the Group’s 2019/20 Current Operating Income, China represents very limited activity in February and March; A slow recovery in activity is announced from April on this market.
As for the other markets, they too should be under pressure.
As for Travel retail, an 80% decline in activity between February and the end of June is forecast.
As for Off-trade, representing ¾ of turnover, count 10% reduction in turnover from mid-March to the end of June.
Note that for this segment, sales will be interrupted between mid-March and the end of June, the points of sale being closed or making no new orders.
Assessment: The combined impact results in an internal decrease in Current Operating Income for the 2019/20 financial year of approximately -20%.
The group also announced the early redemption of bond and liquidity positions.
On March 23, 2020, the Group thus reimbursed an obligation of € 850 million plus interest, for a total amount of € 863 million, without penalty, three months before the maturity date, through the exercise of its right of reimbursement. anticipated.
The next significant payment is scheduled for April 2021, when $ 1 billion is due.
The Group has 3.4 billion euros in credit lines with banks, of which only 0.3 billion euros are currently drawn. These facilities include a syndicated line of credit of 2.5 billion euros, maturing in 2024, currently undrawn.
“Our business model and strategy are resilient. Our Transform & Accelerate three-year strategic plan is a clear factor for success, as evidenced by the results of the 2018/19 financial year and those of the first half of 2019/20. It will help support activity as we go through the COVID-19 crisis.
The environment has been severely degraded due to the COVID-19 epidemic. The gradual recovery in China, thanks to the implementation of strong measures, is encouraging. While we cannot predict the duration and extent of the impact, we remain confident in our strategy. Our priority remains to ensure the health and safety of our employees and partners. I would like to salute the exemplary behavior of our teams during this very difficult period.
Based on the new COVID-19 impact hypotheses, we anticipate an internal decrease in Current Operating Profit of around -20% for the 2019/20 financial year. We are maintaining our strategic course while rolling out a major action plan to reduce our costs. Thanks to our solid fundamentals based on the commitment of the teams and the quality of the portfolio, I am confident in the rebounding capacity and the growth potential of Pernod Ricard“, said Alexandre Ricard, Chairman and CEO of the Pernod Ricard Group.
Featured Photo: Pernod Ricard
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