Equity Research

European Consumer Staples

20 October 2023

Pernod-Ricard SA

Q1: Is this the inflection?

CORE
Pernod improved sentiment on its call by stating that China is
showing signs of stabilisation. We remain cautions given the
weakening real estate market and demographics, and remain PERP.PA/RI FP UNDERWEIGHT
Unchanged
focused on these indicators. European Consumer
NEUTRAL
Staples
Unchanged
Headline number was in-line: Reporting OSG of -2.4% vs consensus -2.6% was in-line with Price Target EUR 167.00
expectations, with the negative performances in China and the US flagged ahead of the print. lowered -0.60% from EUR 168.00
The incremental information on the call was for FY24 expectations to be at the low end of the Price (18-Oct-23) EUR 158.60
4-7% OSG and 50-60bps margin medium term guide, which we expect to stabilise markets. This Potential Upside/Downside +5.3%
is where consensus expectations are, so we expect little changes to numbers.
Market Cap (EUR mn) 40543
China stabilising: Also on the call, the company stated that after a tough July/August,
Shares Outstanding (mn) 255.63
September trading had stabilised in both the on- and off-trades, with a return to weddings and
Free Float (%) 77.48
banquets. Given the recent negative macro headlines, we expect this to help sentiment towards
52 Wk Avg Daily Volume (mn) 0.4
the stock. We remain cautious on the medium/long term China expectations given a weakening
Dividend Yield (%) 2.96
real estate market and worsening demographics.
Return on Equity TTM (%) 14.30
USA showing signs of stabilisation: With the market running at c.2% growth, Pernod's Current BVPS (EUR) 61.81
Source: Bloomberg
depletions are running slightly worse than this around flat or a slight decline, albeit better than
the reported -8%. Much of the impact in the quarter was due to lapping aggressive purchasing
last year ahead of a price increase, as well as retailer destocking due to higher interest rates. We Price Performance Exchange-PA
note, however, that Q2 22 also represents a tough comp, so we still forecast further declines in 52 Week range EUR 218.00-156.35
the quarter.

Full year expectations: Our forecasts align with the guidance given on the conference call with
4.9% OSG in the year, with 5.9% OPG. We notice we are slightly below consensus estimates in
profitability which we believe is due to more pessimistic FX expectations.

Estimates and PT changes: We make limited changes to our estimates based on the reported
Source: IDC
numbers, which lowers our estimates slightly. As a result, our DCF-derived PT declines -0.7% Link to Barclays Live for interactive charting
to €167.
European Consumer Staples
Laurence Whyatt
+44 (0)20 7773 5324
laurence.whyatt@barclays.com
Barclays, UK

Mandeep Sangha
+44 (0)20 3555 2504
mandeep.sangha@barclays.com
Barclays, UK
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that the firm may have a Ashutosh Jain
conflict of interest that could affect the objectivity of this report. Investors should consider this +91 (0)22 6175 1452
report as only a single factor in making their investment decision. ashutosh.jain@barclays.com
This research report has been prepared in whole or in part by equity research analysts based Barclays, UK
outside the US who are not registered/qualified as research analysts with FINRA.
Please see analyst certifications and important disclosures beginning on page 17.
Completed: 19-Oct-23, 13:59 GMT Released: 20-Oct-23, 04:10 GMT Restricted - External
Barclays | Pernod-Ricard SA

PERP.PA: Financial and Valuation Metrics EPS EUR

FY Jun 2022 2023 2024 2025 2026

EPS 8.18A 9.11A 9.00E 9.99E 10.97E
Previous EPS 8.18A 9.11A 9.11E 10.10E 11.06E
Consensus EPS 7.69A 8.81A 9.18E 10.04E 10.92E
P/E 19.4 17.4 17.6 15.9 14.5
Consensus numbers are from Bloomberg received on 18-Oct-2023; 12:50 GMT
Source: Barclays Research

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Barclays | Pernod-Ricard SA

European Consumer Staples NEUTRAL

Pernod-Ricard SA (PERP.PA) UNDERWEIGHT

Income statement (€mn) 2023A 2024E 2025E 2026E CAGR Price (18-Oct-2023) EUR 158.60
Revenue 12,137 12,614 13,437 14,200 5.4% Price Target EUR 167.00
EBITDA (adj) 3,765 3,912 4,247 4,567 6.6% Why UNDERWEIGHT?
EBIT (adj) 3,348 3,314 3,610 3,894 5.2% Pernod has c.15% of sales and
Pre-tax income (adj) 3,057 2,948 3,207 3,458 4.2% c.20% of profits coming from China,
Net income (adj) 2,340 2,255 2,454 2,647 4.2% the majority of which will be cognac
EPS (adj) (€) 9.11 9.00 9.99 10.97 6.4% and whisky sales (it is the market
Diluted shares (mn) 256.9 250.6 245.7 241.3 -2.1% leader in both categories). With
DPS (€) 4.70 4.64 5.15 5.66 6.4% declining demographics and a
slowing economic environment, we
Margin and return data 2023A 2024E 2025E 2026E Average
expect slower growth ahead. The
EBITDA (adj) margin (%) 31.0 31.0 31.6 32.2 31.5
US portfolio is also losing share due
EBIT (adj) margin (%) 27.6 26.3 26.9 27.4 27.0
to limited exposure in the tequila
Pre-tax (adj) margin (%) 25.2 23.4 23.9 24.4 24.2 category.
Net (adj) margin (%) 19.3 17.9 18.3 18.6 18.5
ROA (%) 7.2 6.8 7.6 8.1 7.4 Upside case EUR 187.00
ROE (%) 14.8 14.0 14.5 14.7 14.5 Our upside case assumes no
ROCE (%) 8.5 8.5 9.3 10.0 9.1 material slowdown in China due to
worsening economic conditions or
Cash flow and balance sheet (€mn) 2023A 2024E 2025E 2026E CAGR weakening demographics and the
Cash flow from operations 1,992 1,877 2,681 2,926 13.7% country, resulting in LDD growth. US
Cash flow from investing -602 -883 -941 -994 N/A growth accelerates due to recent
Cash flow from financing -2,987 -1,976 -2,282 -2,382 N/A acquisitions and the Indian
Capital expenditure -602 -883 -941 -994 N/A business sees faster growth due to
Equity free cash flow 1,390 994 1,740 1,740 7.8% an FTA with the UK.
Tangible fixed assets 4,151 3,310 3,613 3,934 -1.8%
Downside case EUR 152.00
Intangible fixed assets 19,000 19,000 19,000 19,000 0.0%
Our downside case assumes a
Cash and equivalents 1,624 642 100 -350 N/A
severe weakening in the Chinese
Total assets 37,677 36,975 37,381 37,875 0.2%
economy, possibly catalysed by a
Short and long-term debt 11,408 11,408 11,408 11,408 0.0% weakening real estate market,
Total liabilities 20,962 19,490 18,896 18,095 -4.8% causing spirits sales to slow to LSD
Shareholders' equity 15,717 16,461 17,434 18,699 6.0% growth. The US market sees limited
Net debt/(funds) 10,267 11,249 11,791 12,241 6.0% acceleration with both Jameson
Valuation and leverage metrics 2023A 2024E 2025E 2026E Average and Absolut stagnating.
P/E (adj) (x) 17.4 17.6 15.9 14.5 16.4 Upside/Downside scenarios
EV/sales (x) 4.2 4.1 3.9 3.7 4.0
EV/EBITDA (adj) (x) 13.6 13.3 12.4 11.7 12.8
EV/EBIT (adj) (x) 15.3 15.8 14.6 13.7 14.8
Equity FCF yield (%) 3.4 2.5 4.5 4.5 3.7
P/BV (x) 2.6 2.4 2.2 2.0 2.3
Dividend yield (%) 3.0 2.9 3.2 3.6 3.2
Net debt/EBITDA (adj) (x) 2.7 2.9 2.8 2.7 2.8
Selected operating metrics 2023A 2024E 2025E 2026E Average
Organic sales growth (%) 10.0 4.9 5.6 5.7 6.5
Tax rate (%) 23 23 23 23 23
Capex/sales (%) 5.0 7.0 7.0 7.0 6.5
Note: FY End Jun
Source: Company data, Bloomberg, Barclays Research

20 October 2023 3
Barclays | Pernod-Ricard SA

ESG Snapshot: Pernod-Ricard SA (PERP.PA)

ESG Overview

Identify:
Factors materially influencing Pernod’s profile: 1) Ability to further enhance water-use efficiency minimising environmental footprint,
and 2) Progress towards reduction of the carbon intensity of its operations.

Impact:
Using a ‘True Cost’ of water as described in our note (linked below) would reduce EBITDA by c.4%. We believe this is a greater risk
than a higher carbon cost. A carbon cost of $100/ton would reduce EBITDA by c.1% (as described in our ESG initiation, also linked
below).

Future:
We see two significant opportunities for Pernod to improve its ESG credentials: 1) The group has an opportunity to make a positive
difference by promoting awareness about negative health effects of alcohol consumption and encourage responsible drinking
practices, 2) To drive resource efficiency and waste avoidance within operations and reduce group’s overall carbon intensity.

Engage: 3 key ESG questions for company engagement

· Q1: How do you intend to promote responsible drinking without cannibalising the volume growth momentum?
· Q2: What impact you see on margins especially when you up the ante along the 2030 S&R Roadmap guidelines? Or is it cost that you
intend to simply pass on?

Strategy & Ambition:

· 2030 S&R Roadmap: Aims to reduce the carbon intensity at production sites (Scope 1 + 2) by 30% by 2030 (vs a base year of 2018).
And 50% reduction in Scope 3 carbon intensity by 2030.
· Aims to further reduce water-use by 20% by 2030 (vs FY18) and replenish 100% of water consumed by production sites in the same
watershed by 2030 (23.4% in FY20).
· Aims to ban all single-use plastics in its promotional items and make its packaging 100% sustainable by 2025.
· The group aims to have no direct suppliers with high or moderate environmental and social risks by 2025.
Source: Company Reports, Barclays Research

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Barclays | Pernod-Ricard SA

Key ESG Metrics for PERP.PA

Environmental 2020 2021 2022

As per 2030 S&R Strategy, Pernod aims to use 100% renewable

Annual Carbon intensity by EBITDA (t/
97 94 78 electricity in its productions sites and admin offices by 2025 – currently
MUSD)
81%. The firm now aims to be 100% water balanced in high-risk
countries and 50% reduction in carbon intensity (2030) aligned with
Water use by hectolitre of production the Science Based Targets initiative to limit global warming to 1.5°C.
6.1 5.6 5.6
(hl/hl)

Social 2020 2021 2022

The group’s Responsible Party programme aims to promote
Employee turnover rate 14.0% 14.6% 14.3% responsible drinking among youth and college students and aims to
reach at least 1 millionyoung adults by 2030.
Women managers 42% 43% 45%

Governance 2020 2021 2022

The Board is comprised of 14 members, seven of whom are
independentand two of whom represent Group employees. The
Independent Board members 57.1% 46.2% 50.0%
group has strong policies on business ethics, anti-competitive
practices and bribery and corruption. In FY22, company validated CSR
Financial KPIs in LTIP 100% 100% 100% criteria for the long-term incentives (LTIP) plan.

Consumer Staples ESG Initiation: ABCs of ESG, 12th Nov 2020 Sustainable & Thematic Investing: Biodiversity: Investing in Nature, 23rd Sep 2020 Global Consumer Staples:
Water: The ‘True cost’, 14 June 2021
Source: Company Reports, Barclays Research

PERNOD-RICARD SA


Blocks represent an aggregated view of, E, S, and G factor scores, respectively, across third-party score providers (one block
indicates a very low average score, five a very high average score). Icons show the dispersion of those scores (no bars
indicates only one source provider, two bars indicate dispersion between providers, full bars indicate aligned scores). For
more details on Barclays ESG Indicators, click here. Data as of 30 Sep 2023. ESG Indicators are published in the first half of
each month and reflect the data as of the end of the previous month. Clients can access the latest ESG Indicators on
Barclays Live. Source: Barclays Research, Sustainalytics, Vigeo Eiris, (V.E), an affiliate of Moody's.

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Barclays | Pernod-Ricard SA

Key Charts
FIGURE 1. Sales split (%) by division FY23 FIGURE 2. Operating profit split (%) by division FY23

Europe
26%
Europe
Asia ROW Asia ROW
28%
43% 45%

Americas
29%
Americas
29%

Source: Company data, Barclays Research Source: Company data, Barclays Research

FIGURE 3. OSG by division FIGURE 4. Pernod PE vs EU Beverages PE

35x
18%
16% 30x
14%
12% 25x
10.0%
10% 20x
8%
5.6% 5.7%
6% 4.9% 15x
4%
10x
2%
0% 5x
2023 2024E 2025E 2026E Oct-13 Oct-15 Oct-17 Oct-19 Oct-21 Oct-23
Group Europe Americas Asia ROW EU Beverages PE Pernod PE

Source: Company data, Barclays Research estimates Source: Bloomberg, Company data, Barclays Research

FIGURE 5. EPS (in local currency) and growth (%) FIGURE 6. Net debt / EBITDA (x)

3.0
12.0 11.0 35%
2.9
10.0 30% 2.9
10.0 9.1 9.0 2.8
8.2 25% 2.8 2.7
8.0 2.7
20% 2.7 2.7
6.2
6.0 15%
2.6 2.5
10%
4.0 2.5
5%
2.0 2.4
0%
0.0 -5% 2.3
2021 2022 2023 2024E 2025E 2026E 2021 2022 2023 2024E 2025E 2026E
EPS (LHS) Growth rate % (RHS) Net Debt/EBITDA

Source: Company data, Barclays Research estimates Source: Company data, Barclays Research estimates

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Barclays | Pernod-Ricard SA

FIGURE 7. Changes to estimates

2023 2024E 2025E 2026E
Actual Old New Change Old New Change Old New Change
Sales 12,137 12,617 12,614 0.0% 13,457 13,437 -0.1% 14,212 14,200 -0.1%
Fx % 1.1% -3.3% -3.4% -9 1.2% 1.0% -18 0.0% 0.0% 0
Organic Growth % 10.0% 4.8% 4.9% 6 5.5% 5.6% 5 5.6% 5.7% 6
Europe 8.0% -0.2% 1.3% 142 1.9% 1.9% -2 2.0% 1.9% -2
Americas 2.0% 3.4% 2.8% -59 5.4% 5.3% -6 5.3% 5.3% -5
Asia ROW 17.0% 9.1% 8.7% -41 7.8% 8.0% 21 7.9% 8.1% 23
U/L Operating Profit 3,348 3,351 3,314 -1.1% 3,647 3,610 -1.0% 3,923 3,894 -0.7%
Organic Growth % 11.0% 4.4% 5.9% 157 7.5% 7.8% 29 7.6% 7.9% 30
Europe 12.3% -1.9% -0.2% 172 2.7% 2.7% -4 2.7% 2.7% -3
Americas -8.7% 4.4% 7.3% 289 8.3% 8.5% 25 8.1% 8.3% 23
Asia ROW 26.6% 7.9% 8.6% 65 9.6% 10.2% 62 9.6% 10.2% 63
EPS 9.11 9.11 9.00 -1.2% 10.10 9.99 -1.1% 11.06 10.97 -0.8%
DPS 4.70 4.70 4.64 -1.2% 5.21 5.15 -1.1% 5.71 5.66 -0.8%
Balance sheet & Cash flow items:
Net debt 10,267 11,433 11,249 -1.6% 11,985 11,791 -1.6% 12,433 12,241 -1.5%
Net debt / EBITDA 2.7x 2.9x 2.9x -0.7% 2.8x 2.8x -0.7% 2.7x 2.7x -0.9%
Recurring FCF 1,390 825 994 20.5% 1,745 1,740 -0.3% 1,946 1,932 -0.7%

€mn unless otherwise noted

Source: Company data, Barclays Research estimates

FIGURE 8. Quarterly FY24E OSG build

New Old
Weight Q1e Q2e Q3e Q4e Q2e Q3e Q4e
32% Europe 1.0% -3.3% 3.8% 5.7% -4.6% 3.6% 1.8%
33% Americas -9.2% -2.0% 9.0% 19.4% 2.6% 6.8% 15.3%
49% Asia RoW 0.0% 8.2% 15.0% 15.7% 8.7% 13.7% 17.7%
Group -2.4% 2.0% 10.1% 13.6% 3.1% 8.8% 12.0%
Source: Company data, Barclays Research estimates

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Barclays | Pernod-Ricard SA

Questions for management

Strategic
• With the world facing a potential recession, how do you expect the appetite for premium
spirits to change?

• How might increasing tensions between the West and China affect your global growth
algorithm?

• Will you be able to offset the less frequent travel, and therefore lower travel retail spend, with
improved off-trade sales?

• Do you see the success of tequila in the US being replicated in Europe? Similarly, do you think
gin’s success in Europe could be replicated in the US?

• Your M&A strategy in the past few years has focused on small, premium brands. Would you
consider larger deals?

Operational
• Digital sales and marketing have become more and more important over the past few years.
How have you made this transition, and how much further do you believe you have to go?

• You recently reduced stock in the inventory of your US distributors. What effect has this had
on your US operations?

• What has been the operational impact of merging the Pernod and Ricard businesses in
France?

• Does not having a beer brand reduce your chances of growth in Africa?

• How can you offset additional potential tariffs on your products given they often originate
in specific geographical places (e.g., cognac, scotch, champagne)?

Financial
• What level of growth do you believe is sustainable in the US? How dependent are you on
Jameson?

• What will lower levels of travel retail do to group margins?

• As whisky recovers its position in Chinese sales, how will this affect your margin in the region?

• You recently started your first share buyback programme. Is this your preferred method of
returning capital to shareholders?

• With greater focus on premium aged spirits, should we expect an increase in ageing
inventories?

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Barclays | Pernod-Ricard SA

OSG by country
FIGURE 9. OSG split by country

Fiscal year ended June FY24E 2024E 2025E 2026E

Sales split Old New Old New Old New

Group 100.0% 4.8% 4.9% 5.5% 5.6% 5.6% 5.7%

China 10.6% 5.5% 5.5% 6.8% 6.8% 6.1% 6.1%
India 12.2% 15.8% 14.2% 14.6% 15.5% 14.8% 15.6%
South Korea 1.2% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Asia/RoW GTR 3.8% 20.0% 20.0% 6.0% 6.0% 6.0% 6.0%
Japan 1.6% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Taiwan 1.0% 7.0% 7.0% 5.0% 5.0% 5.0% 5.0%
Southern Africa 1.3% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Turkey 2.3% 20.0% 20.0% 8.0% 8.0% 8.0% 8.0%
Australia 1.8% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Other Asia/RoW 7.4% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
43.2%
Asia RoW 9.1% 8.7% 7.8% 8.0% 7.9% 8.1%
USA 18.9% 2.7% 2.7% 4.1% 4.1% 4.2% 4.2%
Canada 2.2% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Brazil 1.7% 5.0% -2.0% 15.0% 15.0% 15.0% 15.0%
Mexico 1.0% 5.0% 0.0% 15.0% 15.0% 10.0% 10.0%
Americas GTR 1.2% 7.0% 7.0% 6.0% 6.0% 6.0% 6.0%
Other Americas 4.5% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
29.5%
Americas 3.4% 2.8% 5.4% 5.3% 5.3% 5.3%
France 4.7% 3.0% 3.0% 0.0% 0.0% 0.0% 0.0%
Spain 3.2% 7.0% 5.0% 2.0% 2.0% 2.0% 2.0%
Germany 2.8% 6.0% 6.0% 4.0% 4.0% 4.0% 4.0%
UK 3.5% 4.0% 6.0% 2.0% 2.0% 2.0% 2.0%
Europe GTR 1.1% 10.0% 10.0% 2.0% 2.0% 2.0% 2.0%
Russia 0.8% -50.0% -31.0% 0.0% 0.0% 0.0% 0.0%
Poland 1.4% 4.0% 4.0% 5.0% 5.0% 5.0% 5.0%
Ireland 1.4% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Other Europe 8.4% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
27.3%
Europe -0.2% 1.3% 1.9% 1.9% 2.0% 1.9%
Source: Company filings, Barclays Research

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Barclays | Pernod-Ricard SA

FIGURE 10. Summary table

Fiscal Period 2021 2022 2023 2024E 2025E 2026E

Actual sales - Group € 8,824 € 10,701 € 12,137 € 12,614 € 13,437 € 14,200

Organic sales growth 9.6% 16.7% 10.0% 4.9% 5.6% 5.7%
Exchange, % -6.0% 3.6% 1.1% -3.4% 1.0% 0.0%
Restated Sales 8,824 10,701 12,137 12,614 13,437 14,200
Actual Gross profit - Group € 5,293 € 6,473 € 7,246 € 7,568 € 8,087 € 8,568
Restated Gross Profit - Group € 5,293 € 6,473 € 7,246 € 7,568 € 8,087 € 8,568
Organic Gross margin% 60.9% 60.2% 60.5% 60.0% 60.2% 60.3%
Restated Gross Profit margin 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Actual EBITA - Group € 2,423 € 3,024 € 3,348 € 3,314 € 3,610 € 3,894
Organic profit (EBITA) growth 23.7% 19.1% 11.0% 5.9% 7.8% 7.9%
Organic EBITA margin 30.2% 28.0% 28.5% 27.9% 26.8% 27.4%
Actual sales Europe € 2,557 € 3,130 € 3,465 € 3,442 € 3,508 € 3,576
Organic sales growth 4.0% 18.9% 8.0% 1.3% 1.9% 1.9%
Restated sales 2,557 3,130 3,465 3,442 3,508 3,576
Actual Gross profit 1,534 1,918 2,057 2,057 2,111 2,166
Organic Gross margin 60.3% 61.7% 60.7% 59.8% 60.2% 60.6%
Actual A&P (381) (496) (513) (527) (537) (547)
As % of sales 14.9% 15.8% 14.8% 15.3% 15.3% 15.3%
Actual EBITA € 624 € 790 € 867 € 846 € 869 € 892
Organic EBITA growth 12.1% 25.0% 12.3% -0.2% 2.7% 2.7%
Organic EBITA margin 25.8% 25.7% 26.2% 24.6% 24.8% 25.0%
Organic EBITA margin bps change 186.4 125.4 99.5 (38.3) 18.8 19.0
Actual sales Americas € 2,627 € 3,133 € 3,481 € 3,718 € 3,966 € 4,175
Organic sales growth 13.7% 12.1% 2.0% 2.8% 5.3% 5.3%
Restated Sales 2,627 3,133 3,481 3,718 3,966 4,175
Actual Gross profit 1,699 2,059 2,220 2,379 2,551 2,698
Organic Gross margin 66.7% 63.7% 64.8% 64.1% 64.3% 64.6%
Actual A&P (470) (568) (686) (706) (754) (793)
As % of sales 17.9% 18.1% 19.7% 19.0% 19.0% 19.0%
Actual EBITA 803 1,014 965 976 1,074 1,164
Organic EBITA growth 43.8% 11.8% -8.7% 7.3% 8.5% 8.3%
Organic EBITA margin 37.1% 30.5% 29.0% 28.9% 27.0% 27.9%
Organic EBITA margin bps change 774.6 (8.5) (338.2) 122.5 80.2 78.0
Actual sales Asia ROW € 3,640 € 4,438 € 5,191 € 5,455 € 5,963 € 6,449
Organic sales growth 10.7% 18.5% 17.0% 8.7% 8.0% 8.1%
Restated sales 3,640 4,438 5,191 5,455 5,963 6,449
Actual Gross profit 2,060 2,496 2,969 3,132 3,425 3,704
Organic Gross margin 57.0% 56.6% 57.7% 57.5% 57.4% 57.4%
Actual A&P (542) (633) (740) (835) (912) (987)
As % of sales 14.9% 14.3% 14.3% 15.3% 15.3% 15.3%
Actual EBITA 996 1,220 1,516 1,493 1,667 1,838
Organic EBITA growth 15.8% 21.3% 26.6% 8.6% 10.2% 10.2%
Organic EBITA margin 28.3% 28.0% 29.8% 29.2% 27.9% 28.5%

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Barclays | Pernod-Ricard SA

Fiscal Period 2021 2022 2023 2024E 2025E 2026E

Organic EBITA margin bps change 123.9 63.9 226.2 (2.3) 54.8 54.4
€mn unless otherwise noted
Source: Company data, Barclays Research estimates

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FIGURE 11. Profit and loss statement

Fiscal Period 2021 2022 2023 2024E 2025E 2026E

Net Sales € 8,824 € 10,701 € 12,137 € 12,614 € 13,437 € 14,200

COGS (3,531) (4,228) (4,891) (5,046) (5,351) (5,632)
Gross Profit 5,293 6,473 7,246 7,568 8,087 8,568
Gross margin % 60.0% 60.5% 59.7% 60.0% 60.2% 60.3%
Advertising and promotion costs (1,393) (1,697) (1,939) (2,068) (2,203) (2,327)
A&P costs margin % 15.8% 15.9% 16.0% 16.4% 16.4% 16.4%
Structure costs (1,477) (1,752) (1,959) (2,187) (2,274) (2,347)
Structure costs margin % 16.7% 16.4% 16.1% 17.3% 16.9% 16.5%
EBITA (beia) € 2,423 € 3,024 € 3,348 € 3,314 € 3,610 € 3,894
Growth (% YoY) 7.2% 24.8% 10.7% -1.0% 8.9% 7.9%

EBITA (beia) Margin, % 27.5% 28.3% 27.6% 26.3% 26.9% 27.4%

∆ in Operating Margin (bps YoY) 70.3 80.0 (67.4) (131.2) 59.3 55.5
Depreciation (367) (381) (417) (598) (637) (674)
EBITDA (adj) 2,790 3,405 3,765 3,912 4,247 4,567
Net financing costs (262) (215) (291) (366) (403) (435)
Other financial income/expense 0 0 0 0 0 0
Recurring Profit Before Tax 2,161 2,809 3,057 2,948 3,207 3,458
Tax (526) (651) (691) (667) (725) (782)
- % tax rate -24.3% -23.2% -22.6% -22.6% -22.6% -22.6%
Minority Interest and others (24) (34) (25) (26) (28) (29)
Income from associates 0 0 0 0 0 0
Net Profit from Ordinary Activities € 1,612 € 2,124 € 2,340 € 2,255 € 2,454 € 2,647
Growth (% YoY) 12.0% 31.8% 10.2% -3.7% 8.8% 7.9%

Adjusted net income margin 18.3% 19.8% 19.3% 17.9% 18.3% 18.6%
Non- recurring Income/ Expense
Net Capital gains/(losses) on asset disposals 0 0 (0) 0 0 0
Restructuring Costs 0 0 (0) 0 0 0
Other income/expense (62) (62) (83) 0 0 0
Other operating Income/Expense (62) (62) (84) 0 0 0
Net Profit after Non-recurring Items 1,305 1,995 2,262 2,255 2,454 2,647
Net Year End Shares (m) 262 258 256 251 246 242
Shares, Average (m) 262 261 258 253 249 244
Diluted number of shares 262 260 257 251 246 241
Clean EPS € 6.16 € 8.18 € 9.11 € 9.00 € 9.99 € 10.97
Clean EPS Growth 13.1% 32.7% 11.4% -1.2% 11.0% 9.8%
Reported Diluted EPS 4.99 7.68 8.81 9.00 9.99 10.97
Reported EPS 4.98 7.64 8.78 8.90 9.86 10.84
Dividend per share 3.12 4.12 4.70 4.64 5.15 5.66
Growth (% YoY) 17.3% 32.1% 14.1% -1.2% 11.0% 9.8%

Payout ratio 50.6% 50.4% 51.6% 51.6% 51.6% 51.6%

Dividends (818) (1,076) (1,210) (1,176) (1,282) (1,382)

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Barclays | Pernod-Ricard SA

Fiscal Period 2021 2022 2023 2024E 2025E 2026E

Retained Earnings 487 919 1,052 1,078 1,172 1,265

€mn unless otherwise noted
Source: Company data, Barclays Research estimates

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Barclays | Pernod-Ricard SA

FIGURE 12. Balance sheet

Fiscal Period 2021 2022 2023 2024E 2025E 2026E

Intangible assets and goodwill 16,230 17,657 19,000 19,000 19,000 19,000
Property, plant & equipment 3,316 3,953 4,151 3,310 3,613 3,934
Non-current financial assets 559 559 559 559 559 559
Investments in associates 30 30 30 30 30 30
Non-current derivative instrument 58 58 58 58 58 58
Deferred tax assets 1,623 1,844 1,870 1,870 1,870 1,870

Non-current assets 21,816 24,101 25,668 24,827 25,130 25,451

Inventories 6,555 7,369 8,104 9,149 9,675 10,184
Trade receivables 1,126 1,388 1,814 1,890 2,008 2,122
Other receivables 554 580 466 466 466 466
Current derivative instruments + Assets held for sale 11 15 1 1 1 1
Cash and cash equivalents 2,086 2,559 1,624 642 100 (350)
Current assets 10,332 11,911 12,009 12,148 12,251 12,424

Total assets 32,148 36,012 37,677 36,975 37,381 37,875

Current provisions 163 150 164 164 164 164
Trade payables 2,337 3,019 3,461 3,580 3,786 3,985
Other current liabilities + liabities held for sale 1,134 1,311 1,556 1,556 1,556 1,556
Income tax payable 282 263 113 113 113 113
Bonds- current 70 842 580 580 580 580
Other current financial liabilities + Cur.derivative
128 415 962 962 962 962
instruments
Lease liability (2020 onwards) 103 107 99 99 99 99
Total current liabilities 4,218 6,107 6,935 7,054 7,260 7,459
Non-current provisions 253 318 0 0 0 0
Provisions for pensions and other long-term employee
477 361 0 0 0 0
benefits
Deferred tax liabilities 2,825 3,139 3,777 2,185 1,385 385
Bonds- non current 8,787 9,238 9,678 9,678 9,678 9,678
Lease liability (2020 onwards) 405 400 384 384 384 384
Other non-current financial liabilities + deriv.
108 196 188 188 188 188
instruments
Total non-current liabilities 12,855 13,652 14,027 12,435 11,635 10,635

Total Liabilities 17,073 19,759 20,962 19,490 18,896 18,095

Share Capital 411 411 411 411 411 411
Share premium 3,052 3,052 3,052 3,052 3,052 3,052
Retained earnings and currency translation
10,771 10,696 11,668 12,720 13,798 14,971
adjustments
Sh Buyback - 20 - 813 - 786 - 800 - 1,000 - 1,000
Group net profit 487 919 1,052 1,078 1,172 1,265

Group shareholders' equity 14,829 15,944 15,717 16,461 17,434 18,699

Minority interests 246 309 998 1,024 1,052 1,081

Total shareholders' equity 15,075 16,253 16,715 17,486 18,485 19,780

Total liabilities and shareholders' equity 32,148 36,012 37,677 36,975 37,381 37,875
€mn unless otherwise noted
Source: Company data, Barclays Research estimates

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Barclays | Pernod-Ricard SA

FIGURE 13. Cash flow statement

Fiscal Period 2021 2022 2023 2024E 2025E 2026E

Operating Activities
P&L EBIT after exceptionals 2,361 2,961 3,260 3,314 3,610 3,894
Depreciation and amortisation 367 381 417 598 637 674
Net changes in provisions pre Allied pension -80 7 -74 0 0 0
Investment in Allied Domecq Pension Fund 0 0 0 0 0 0
Net change in provision -80 7 -74 0 0 0
Net change in impairment of goodwill and intangible
assets 78 10 52 0 0 0
Impact of derivatives hedging trading transactions 1 -2 -87 0 0 0
Fair value adjustments on biological assets and
investments 0 0 0 0 0 0
Net (gain)/loss on disposal of assets -16 -5 -74 0 0 0
Share-based payment 28 40 44 0 0 0
Self financing capacity before interest & taxes 2,739 3,392 3,538 3,912 4,247 4,567
Investment/retreatment in Allied Domecq Pension Fund 0 0 0 0 0 0
Self financing capacity before interest & taxes and
Allied Pension 2,739 3,392 3,538 3,912 4,247 4,567
Inventories (388) (814) (735) (1,045) (526) (509)
Receivables (220) (262) (426) (76) (118) (114)
Creditors 460 682 442 119 206 199
Other movements 94 142 151 0 0 0
Decrease/(increase) in working capital -54 -252 -568 -1002 -438 -424
Cash flow from operations 2,685 3,140 2,970 2,910 3,809 4,143
Interest paid (received) (371) (260) (326) (366) (403) (435)
Income tax (paid) received (668) (677) (651) (667) (725) (782)
Income/loss from extr items, cash flow 0 0 0 0 0 0
Net Cash flow from operating activities 1,646 2,203 1,992 1,877 2,681 2,926
Investing Activities
Capital expenditures -370 -481 -602 -883 -941 -994
Disposals of PP&E and intangible assets 0 0 0 0 0 0
Cash expenditures for acquisition of non-current
financial assets 0 0 0 0 0 0
Cash proceeds from disposal of non-current financial
assets 0 0 0 0 0 0
Cash flow from investing activities (370) (481) (602) (883) (941) (994)
Financing Activities
Dividends paid (704) (826) (1,072) (1,176) (1,282) (1,382)
Issuance/ Repayment of long term debt + Lease (549) (723) (1,129) 0 0 0
(Acquisition)/disposal of treasury shares -20 -813 -786 -800 -1000 -1000
Cash flow from financing activities (1,273) (2,362) (2,987) (1,976) (2,282) (2,382)
Increase/(decrease) in cash and cash equivalents 3 (640) (1,597) (982) (542) (450)
Net effect of exchange rate changes 265 -562 53 0 0 0
Increase/(decrease) in cash and cash equivalents post
currency impact 268 (1,202) (1,544) (982) (542) (450)
Cash and cash equivalents at beginning of period 1,935 2,086 2,559 1,624 642 100

20 October 2023 15
Barclays | Pernod-Ricard SA

Fiscal Period 2021 2022 2023 2024E 2025E 2026E

Cash and cash equivalents at end of period 2,086 2,559 1,624 642 100 (350)
€mn unless otherwise noted
Source: Company data, Barclays Research estimates

20 October 2023 16
Barclays | Pernod-Ricard SA

Analyst(s) Certification(s):
We, Mandeep Sangha and Laurence Whyatt, hereby certify (1) that the views expressed in this research report accurately reflect our personal views
about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or
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Primary Stocks (Ticker, Date, Price)
Pernod-Ricard SA (PERP.PA, 18-Oct-2023, EUR 158.60), Underweight/Neutral, A/CD/D/E/J/K/L/M/N
Unless otherwise indicated, prices are sourced from Bloomberg and reflect the closing price in the relevant trading market, which may not be the last
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common equity securities of this issuer.
H: This issuer beneficially owns more than 5% of any class of common equity securities of Barclays PLC.

20 October 2023 17
Barclays | Pernod-Ricard SA

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Guide to the Barclays Fundamental Equity Research Rating System:
Our coverage analysts use a relative rating system in which they rate stocks as Overweight, Equal Weight or Underweight (see definitions below)
relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry (the "industry coverage universe").
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horizon.
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Industry View
Positive - industry coverage universe fundamentals/valuations are improving.
Neutral - industry coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
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Below is the list of companies that constitute the "industry coverage universe":
European Consumer Staples
AAK (AAK.ST) AG Barr (BAG.L) Altria Group Inc. (MO)
Anheuser-Busch InBev (ABI.BR) Associated British Foods (ABF.L) Barry Callebaut (BARN.S)

20 October 2023 18
Barclays | Pernod-Ricard SA

Beiersdorf AG (BEIG.DE) British American Tobacco Plc (BATS.L) Britvic (BVIC.L)

C&C Group (CCR.L) Carlsberg AS-B (CARLb.CO) Chr. Hansen (CHRH.CO)
Coca-Cola Hellenic BC AG (CCH.L) Corbion (CORB.AS) Danone (DANO.PA)
Davide Campari N.V. (CPRI.MI) Diageo PLC (DGE.L) Essity (ESSITYb.ST)
Fever-Tree Drinks PLC (FEVR.L) Glanbia (GL9.I) Haleon (HLN.L)
Heineken NV (HEIN.AS) Henkel (HNKG_p.DE) Imperial Brands Plc (IMB.L)
Japan Tobacco Inc. (JAPAY) JDE Peet’s BV (JDEP.AS) Kerry Group (KYGa.L)
L'Oréal SA (OREP.PA) Leroy Seafood Group ASA (LSG.OL) Lindt & Spruengli (LISN.S)
Mowi (MOWI.OL) Nestle SA (NESN.S) Novozymes (NZYMb.CO)
Ontex Group (ONTEX.BR) Orkla ASA (ORK.OL) Pernod-Ricard SA (PERP.PA)
Philip Morris International Inc. (PM) PZ Cussons Plc (PZC.L) Reckitt Benckiser Group PLC (RB.L)
Royal Unibrew (RBREW.CO) Rémy Cointreau (RCOP.PA) Salmar ASA (SALM.OL)
Suedzucker AG (SZUG.DE) Tate & Lyle (TATE.L) Treatt (TET.L)
Unilever PLC (ULVR.AS) Unilever PLC (ULVR.L) Vector Group Ltd (VGR)

Distribution of Ratings:
Barclays Equity Research has 1691 companies under coverage.
50% have been assigned an Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 47% of companies
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Barclays Bank PLC, DIFC Branch (Barclays Bank, DIFC)

20 October 2023 19
Barclays | Pernod-Ricard SA

Pernod-Ricard SA (RI FP / PERP.PA)

Stock Rating: UNDERWEIGHT
Industry View: NEUTRAL
Closing Price: EUR 158.60 (18-Oct-2023)

Rating and Price Target Chart - EUR (as of 18-Oct-2023)

Currency=EUR

300

275

250

225

200

175

150

125

Jan-2021 Jul-2021 Jan-2022 Jul-2022 Jan-2023 Jul-2023

Closing Price Target Price Rating Change

Source: IDC, Barclays Research

Link to Barclays Live for interactive charting

20 October 2023 20
Barclays | Pernod-Ricard SA

Publication Date Closing Price* Rating Adjusted Price

Target
13-Sep-2023 171.55 Underweight 168.00
01-Sep-2023 194.30 241.00
05-Jul-2023 204.20 262.00
28-Apr-2023 215.00 265.00
17-Feb-2023 189.35 268.00
05-Jan-2023 184.45 264.00
21-Oct-2022 180.00 265.00
30-Sep-2022 188.85 281.00
02-Sep-2022 189.45 277.00
07-Jul-2022 176.35 256.00
29-Apr-2022 197.65 260.00
11-Feb-2022 191.70 255.00
05-Jan-2022 216.40 243.00
22-Oct-2021 199.45 233.00
05-Oct-2021 192.35 229.00
02-Sep-2021 186.05 223.00
12-Jul-2021 182.40 210.00
02-Jul-2021 185.35 209.00
23-Apr-2021 173.45 197.00
09-Apr-2021 168.55 195.00
12-Feb-2021 159.30 194.00
04-Jan-2021 158.70 185.00
23-Oct-2020 147.90 168.00
On 19-Oct-2020, prior to any intra-day change that may have been
published, the rating for this security was Overweight, and the adjusted
price target was 173.00.
Source: Bloomberg, Barclays Research
*This is the closing price referenced in the publication, which may not be
the last available closing price at the time of publication.
Historical stock prices and price targets may have been adjusted for stock
splits and dividends.

A: Barclays Bank PLC and/or an affiliate has been lead manager or co-lead manager of a publicly disclosed offer of securities of Pernod-Ricard SA in the
previous 12 months.
CD: Barclays Bank PLC and/or an affiliate is a market-maker in debt securities issued by Pernod-Ricard SA.
D: Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from Pernod-Ricard SA in the past 12 months.
E: Barclays Bank PLC and/or an affiliate expects to receive or intends to seek compensation for investment banking services from Pernod-Ricard SA
within the next 3 months.
J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities by Pernod-Ricard SA and/or in any related
derivatives.
K: Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation (including compensation for brokerage services, if
applicable) from Pernod-Ricard SA within the past 12 months.
L: Pernod-Ricard SA is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate.
M: Pernod-Ricard SA is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC
and/or an affiliate.
N: Pernod-Ricard SA is, or during the past 12 months has been, a non-investment banking client (non-securities related services) of Barclays Bank PLC
and/or an affiliate.
Valuation Methodology: Our price target is driven by a Discounted Cash Flow methodology (DCF), based on a 2.0% terminal FCF growth rate with an
8.0% WACC.
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Upside risk: If the material slowdown in China that
we expect due to worsening economic conditions and/or weakening demographics does not occur, it would be a material upside risk to our thesis. In
addition, US growth accelerating due to recent acquisitions and the Indian business seeing faster growth due to an FTA with the UK could mean overall
higher growth for Pernod's group performance. Finally, any slowdown in the tequila trend (where Pernod is under-indexed) in the US, would be an
upside risk to our thesis. Downside risk: The key downside risk to our thesis is a sharper-than-expected downturn in premium cognac in China due to a
severe weakening of the economy, possibly catalysed by a weakening real estate market, or a political revamp of the bribery investigations or tensions
with the US spilling over. Further regulation in India affecting the super-premium and premium segments and further declines in Absolut in US could

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Barclays | Pernod-Ricard SA

also negatively affect our forecasts. Any increase in the prevalence of lockdowns in key sales regions would likely further harm sales, particularly in the
on-trade.
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