PARIS (Reuters) - French spirits maker Pernod Ricard said on Thursday it was suspending a share buyback of up to 500 million euros ($541 million) and keeping a tight grip on costs in response to the coronavirus epidemic that cut third-quarter sales by 14.5%.
Pernod Ricard, which owns Mumm champagne, Absolut vodka and Martell cognac, said its key Chinese market was on a slow and gradual recovery since the start of April. The drinks maker also reiterated its revised March guidance for an organic decline of around 20% in full-year current operating profit.
“We are staying the strategic course while implementing a comprehensive action plan to mitigate costs and tightly manage cash,” Chief Executive Alexandre Ricard said in a statement.
“Thanks to our solid fundamentals and strong liquidity position, I am confident in Pernod Ricard’s ability to bounce back.”
Pernod Ricard reported sales of 1.736 billion euros in the three months to March 31, a 14.5% fall on a like-for-like basis.
By 0935 GMT, Pernod Ricard shares were flat, having opened 2% higher.
Jefferies analysts highlighted Pernod’s “less bad than expected third quarter sales” and relief that the company kept its full-year guidance unchanged, committed to pay an interim dividend of 1.18 euros per share in July, and flagged cost control and a strong liquidity position.
Jefferies analysts had expected third-quarter sales to fall by 21.5% while the market consensus had pointed to a 15.9% decline.
Over nine months, sales fell 2.1%, reflecting a 13% fall in global travel retail and an 11% fall in China sales.
The biggest international spirits maker in China and the world’s second-biggest behind Diageo, had warned in February it expected the coronavirus outbreak that shut bars and clubs in China to have a severe impact on its third quarter sales.
China accounts for around 10% of sales at Pernod Ricard and is its second-largest market after the United States.
In March, the group updated its guidance, warning of a hit of around 20% to full year profit from recurring operations as a result of the slump in business as the coronavirus crisis went global.
Pernod is seeing a slow recovery in China, with outlets re-opening progressively but physical distancing was impacting customer traffic at venues.
“The Chinese are going back to work notably in the industrial sector but consumption in the leisure sector is slow. The mood is not really one of going out,” Finance Chief Helene de Tissot told Reuters by phone.
In the United States, where nine-month sales rose 3%, the group had a good start in January and February before seeing a significant slowdown from bar and restaurants closures in March.
But there was strong growth in store sales reflecting some pantry loading, it said.
Pernod’s cost control measures range from the cancellation of advertising and promotion spending when no longer relevant to a freeze of recruitment and travel expenses.
($1 = 0.9236 euros)
Reporting by Dominique Vidalon and Raju Gopalakrishnan. Editing by Jane Merriman