Pernod ricard financial analysis 2010

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Financial Analysis Pernod Ricard
Financial Statement and Business Analysis November the 9th 2010

M. Autret T. Bourlière C. Fraquelli G. Garcia Huertas M. Leoni

Financial Analysis
November 9th 2010

Company overview
A global leader Pernod Ricard is the world’s co-leader in wines and spirits with consolidated sales of € 7,081 million in 2009/10. Since its creation in 1975, Pernod Ricardhas undergone steady development, founded on both organic growth and successive acquisitions. The purchase of Allied Domecq (2005) and V&S in July 2008 is the most recent sign of the Group’s worldwide ambitions that has become the 2nd largest spirits producer only 0.2% behind Diageo

Strategic objectives Pernod Ricard's undoubted aim is to become the world's leading wine & spirits company ifnot by volume, certainly by value sales. Following the acquisition of most of Allied Domecq's brand portfolio and V&S the company is now the second to Diageo in both volume & value terms in spirits and moved from the top 20 to the top 10 in wine. With net sales currently around 70% of Diageo's it has some way to go, although the latter's sales include beer. Pernod Ricard has laid out three majorstrategic objectives:  Premiumise the portfolio  Focus on strategic brands  Develop in emerging markets. Pernod Ricard’s strong global distribution & portfolio of premium brands is in very strong position to exploit dynamic growth in emerging markets & continue to benefit from good growth in core markets.

2009/ 2010 Results
1Organic growth in sales (+2%): € 7,081 million
 Profit fromrecurring operations (+4%) Significant reinvestment to support brands  Increase in marketing investment: € 1,262 million (+2%, organic growth +5%) Further key stage in debt reduction  Marked improvement in Net Debt / EBITDA ratio (on average foreign exchange rates): 4.9 at 30 June 2010 vs 5.4 at 30 June 2009 Strong cash generation  Free Cash Flow from recurring operations € 1,160 million

Thefollowing analysis will be focused on the examination of the 1/ Group profitability, 2/Return on investment, and 3/ Cash generation capacity as well as its financial current situation in the frame of its strategic ambitions. 2

Financial Analysis
November 9th 2010

GROUP BUSINESS ANALYSIS: BALANCE SHEET
1. Balance Sheet Analysis
Pernod Ricard’s Balance sheet has known important fluctuationwithin the past five years. In a first quick interpretation, we can see 3 major points:  Total Assets have grown by 37% between 2006 and 2010 due to the external growth through acquisitions Total Liabilities have grown by 30% between 2006 and 2010 due to the financing of the acquisitions through debt. Equity has grown by almost 60% between 2006 and 2010 2007 M€ 19471 13013 6459 2008 M€ 18431 118346598 2009 M€ 24867 17199 7608 2010 M€ 27108 17766 9338





2006 M€ Total Assets 19760 Total Liabilities 13708 Equity 5872 Balance Sheet

% Var NA NA NA

% Var -1% -5% 10%

% Var -5% -9% 2%

% Var 35% 45% 15%

% Var 9% 3% 23%

The detailed analysis drives us to the following conclusions:   Between 2006 and 2008, Pernod Ricard’s Policy was to reduce its liabilities and throughthat increase its Equity. In the year 2008-2009 there is a big increase of both liabilities and assets due to the acquisitions of Vine&Spirit Group (Owner of Absolut) in July 2008 through a fundraising. The efficiency of the newly acquired group created a raise in terms of equity. In the year 2009-2010 there is an important increase in equity. That raise is due to a capital increase of 1200M€

2.

Liquidity Ratio
Constellation ($) 2009 2010 2534,5 2589,1 1326,4 1372,6 1828,7 1879,9 1,91 1,89 0,53 0,52 Diageo (£) 2008 2009 5521 6067 4707 3986 2688 3078 1,17 1,52 0,60 0,75

Pernod Ricard (€) Liquidity Ratios 2006 2007 2008 Total current assets 5542 5461 5546 Total current liabilities 3611 2858 3147 Inventories 3327 3563 3717 Current Ratio 1,53 1,91 1,76 Acid test ratio 0,61 0,66...
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