Pernod Ricard (Euronext: RI) reported a 19% decline in group share of net profit from recurring operations to €1,476 million for FY26, driven by soft demand in the US and China.

The spirits giant saw organic net sales fall 3.9% to €9,404 million, while free cash flow improved by 6% to €1,197 million, reflecting disciplined working capital management.

Financial Performance

Profit from recurring operations totalled €2,423 million, an organic decline of 5.2% and a reported drop of 17.9%. The reported figure was impacted by adverse foreign exchange effects of €268 million and a negative perimeter effect of €114 million from brand disposals.

Group share of net profit was €1,203 million, down 26% on a reported basis due to higher non-recurring restructuring charges. Earnings per share fell 19% to €5.85.

Operating margin stood at 25.8%, down 35 basis points organically. Gross margin faced pressure from negative price/mix, tariffs, and COGS inflation, partially offset by accelerated operational efficiencies. Advertising and promotion (A&P) spend was maintained at 15% of net sales, at the lower end of the target range.

Regional and Brand Dynamics

The Americas region saw net sales decline 10%, with the US down 14% due to inventory adjustments and economic moderation. Jameson and Kahlúa outperformed their competitive sets in the US, while Skrewball and Malibu showed improving sell-out trends.

In Asia-RoW, India emerged as a key growth driver with organic sales up 7% (9% excluding Imperial Blue), fueled by premiumisation and strong performance from Royal Stag and Blenders Pride. Conversely, China sales plummeted 19% amid weak consumer sentiment and regulatory pressures, particularly impacting Martell.

Europe declined 3%, with France, Spain, and Germany recording drops despite strong growth for Perrier-Jouët and Bumbu. Global Travel Retail fell 3%, though market share gained, with Q4 sales weighed down by Middle East conflict impacts.

What the Numbers Show

A significant divergence exists between Pernod Ricard’s top-line pressure and its bottom-line resilience. While organic sales contracted by 3.9%, structure costs were reduced by 8.0% through the "Fit for Future" operating model. This aggressive cost discipline allowed the company to defend its operating margin at 25.8% despite gross margin headwinds from tariffs and mix shifts. The acceleration of the €1 billion operational efficiency program, which delivered half its target in FY26 alone, underscores a strategic pivot toward margin protection over volume growth in challenging markets.

Cash Flow and Balance Sheet

Free cash flow rose 6% to €1,197 million, supported by a 17 percentage point improvement in cash conversion to 91%. This improvement stemmed from lower trade receivables and finished goods inventories, partly offset by lower payables. Strategic investments, including capex, were optimised to €616 million, significantly below recent peaks.

Net debt decreased by €65 million to €10,662 million, aided by improved cash generation and positive M&A contributions. However, the Net Debt/EBITDA ratio increased to 3.7x, primarily reflecting the decline in profit rather than increased leverage.

Outlook and Dividend

For FY27, Pernod Ricard expects organic net sales to be broadly stable, citing continued declines in the US and China offset by positive momentum in the Rest of World, notably India. The company aims to maintain A&P investment at c.16% of net sales and strongly defend organic operating margins through strict cost control.

The Board proposed a stable dividend of €4.70 per share, subject to shareholder approval at the Annual General Meeting on November 20, 2026. Shareholders may opt to receive the final dividend of €2.35 in cash or shares.

Pernod Ricard published its half-year report on the liquidity contract managed by Rothschild Martin Maurel, covering the period from January 1, 2026, to June 30, 2026. The disclosure details the trading activity and resources held in the liquidity account, which are designed to enhance the marketability of the company’s shares listed on Euronext. As of June 30, 2026, the liquidity account contained 6,500 shares and cash resources of €4,060,352.

During the first half of 2026, the market maker executed a total of 7,235 transactions involving 664,974 shares. Purchase transactions accounted for 3,605 trades totaling 328,237 shares with a value of €23,542,435.55. Sale transactions comprised 3,630 trades involving 336,737 shares valued at €24,214,573.66. This activity reflects a slight bias toward selling, with sale volumes exceeding purchase volumes by approximately 8,500 shares.

Comparing the current position to the previous year-end, the number of shares held in the liquidity account decreased significantly from 15,000 shares as of December 31, 2025, to 6,500 shares as of June 30, 2026. Conversely, the cash component increased from €3,347,050 to €4,060,352 over the same interval. This shift indicates that share sales outpaced purchases in terms of quantity, while the higher value of sales relative to purchases contributed to the growth in cash reserves.

Change in Market Maker

Effective July 1, 2026, the management of Pernod Ricard’s liquidity agreement was transferred to Rothschild & Co Global Markets Solutions (Europe) SA. This change follows a reorganization within the Rothschild & Co group, where market-making activities were moved from Rothschild & Co Martin Maurel to the new entity. The company stated that this transfer has no impact on the terms and conditions of the liquidity agreement or on the resources allocated to its implementation.

What the Numbers Show

The trading data reveals a balanced but slightly net-negative position for shares held in the liquidity account. While the number of purchase and sale transactions was nearly identical (3,605 vs. 3,630), the volume of shares sold exceeded those bought by 2.6%. More notably, the value of shares sold (€24.2 million) was higher than the value of shares purchased (€23.5 million), suggesting that average execution prices for sales were likely higher than for purchases, or that larger blocks were sold. This dynamic contributed to the reduction in share holdings and the increase in cash balances within the liquidity account.