French spirits producer Pernod Ricard claimed on Thursday it was halting a share buyback of up to 500 million euros ($541 million) and retaining a stronghold on costs in reaction to the coronavirus epidemic that dropped third-quarter sales by 14.5%.
Pernod Ricard, which owns Mumm champagne, Martell cognac, and Absolut vodka, claimed its critical Chinese market was on a slow and gradual recovery since the start of April. The drinks producer also reiterated its revamped March guidance for an organic decline of around 20% in full-year current operating profit.
“We are staying in the strategic lane while applying a comprehensive action plan to tightly manage cash and mitigate costs,” Chief Executive Alexandre Ricard claimed.
“Thanks to our strong liquidity position and robust fundamentals, I am confident in Pernod Ricard’s capability to bounce back.”
Pernod Ricard recorded 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 emphasized Pernod’s “less bad than expected third-quarter sales” and relief that the company kept its full-year guidance unchanged, committed to paying an interim dividend of 1.18 euros per share in July, and flagged cost control and a strong liquidity position.
Jefferies analysts had anticipated third-quarter sales to drop by 21.5% while the market consensus had pointed to a 15.9% decline.
Over nine months, sales dropped 2.1%, reflecting a 13% fall in global travel retail and an 11% fall in China sales.
The biggest international spirits producer in China and the world’s second-biggest behind Diageo had cautioned in February it anticipated the coronavirus outbreak that closed 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, cautioning of a hit of around 20% to full-year profit from recurring operations as a result of the slump in business as the coronavirus turmoil went global.
Pernod sees a sluggish recovery in China, with outlets re-opening progressively, but physical distancing was influencing 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 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 the bar and restaurant closures in March.
But there were strong growth in-store sales reflecting some pantry loading, it said.
Pernod’s cost management procedures range from the postponement of advertising and promotion spending when no longer relevant to a freeze of recruitment and travel expenses.