Pernod Ricard, the world’s second-largest distiller, warned the strong euro will erode full-year earnings as it means revenue from selling Absolut vodka and Jameson whiskey in the US will be worth less when converted from dollars.
Currency movements are expected to trim profit by about €125 million, the Paris-based company said Thursday. The stock fell as much as 4.2 per cent in early Paris trading, the steepest intraday decline in almost a year.
European companies are in the unusual position of facing a currency headwind that’s crimping their results as the euro trades near its highest level since early 2015. That’s bound to become a growing theme as earning reports accelerate later this month; Richemont’s margins will probably contract by 430 basis points due to the strong euro, Mario Ortelli, an analyst at Sanford C. Bernstein said Wednesday. The euro has gained 6.5 per cent against the dollar in the past 12 months.
The outlook is worse than expected and could lead to a three per cent downgrade to earnings per share, Exane BNP Paribas analysts led by Eamonn Ferry wrote in a note to investors.
Pernod Ricard’s profit from recurring operations should rise three per cent to five per cent this fiscal year on an organic basis, which excludes currency shifts, the Chivas Regal maker said. Earnings rose 3.3 per cent by that gauge in the 12 months through June, matching analysts’ estimates, and in the middle of its forecast for two per cent to four per cent growth.
Last month, Kenneth Griffin’s investment company Citadel bet 1.33 million shares worth about €157 million against the distiller in its largest publicly disclosed short position.
Pernod Ricard’s currency forecast is based on an average euro-dollar rate of 1.18.
"It’s still early on in the year, so who knows where the euro will end up against the dollar?" Chief Executive Officer Alexandre Ricard said on a call with investors. "In any case, that’s life."
News by Bloomberg - edited by Hospitality Ireland
