EU CONSUMER CYCLICALS: Pernod Ricard; 1Q Results (x2)

(RIFP; Baa1/BBB+/NR) (equities +4.2%)

Pernod is painting the 1Q as exceptional but we see mixed evidence of that. Guidance leans on "improving trends skewed toward 2H," though management avoided quantifying that outside of the low bar to beat 1H.

• US -16% (20% of group) on the well flagged inventory de-stocking. But sell-out was still -6%, lagging market's -1 to -2% fall. Stays shy of any explicit 2H guidance.
• India +3% (13% of group) would have been +7% without the double digit decline in Maharashtra, one of its largest states at 14% of country revenues. This was on an increase in the state's excise tax from 300% to 450% and will continue to drag on results this FY.
• China -27% (8% of group) but it says ex. inventory impacts it would have been down mid-teens, adding "consumer demand in China domestically is very soft". Despite posting better numbers, LVMH still noted Cognac was weak in the region (which through Martell brand is main exposure for Pernod).
• Global Travel retail -15% (6% exposure); China Cognac/Martell sales will resume in Q2 helping it here but it notes broader Asia was still weak.
• Europe -4% (30%) on no one-offs
   
• It says it will take all measures to protected EBIT & cash generation including limiting capex + change in strategic inventories to <€900m (vs. €1.2b LY).
• It was net levered 3.3x to end last year.