Pernod Ricard S.A.

FY25 organic net sales were down 3% and reported net sales were down 6%. Organic profit from recurring operations fell 0.8%, while organic operating margin expanded 64 bps; reported operating margin was up 6% despite a EUR 112 million negative FX impact and a EUR 29 million negative perimeter impact. EPS declined 8%. Free cash flow was EUR 1.133 billion, up 18%, CapEx was EUR 656 million, strategic inventories were EUR 557 million, and net debt ended at EUR 10.7 billion with leverage of 3.3x. For FY26, management expects a transition year with improving top-line trends versus FY25, strategic investments below EUR 900 million, cash conversion moving toward circa 80%, and significantly negative FX at current spot rates. They also said FY26 will see Q1 weakness from U.S. distributor inventory adjustments, China inventory adjustments and soft demand, Maharashtra excise changes, and travel retail phasing, while medium-term guidance remains 3% to 6% organic sales growth and annual margin expansion.

Alexandre Ricard framed the year as one of navigating a challenging environment with agility, discipline, and strategic conviction, while continuing to invest behind brands and protect long-term growth. He emphasized that volume recovery has resumed, innovation is scaling across the portfolio, and the company is using its geographic balance and brand mix to offset weakness in China, the U.S., and travel retail Asia. His tone on FY26 was cautious but confident: a transition year, with top-line improvement expected later in the year and a focus on flexibility, simplification, and fit-for-future organization design.

Helene de Tissot highlighted that margin expansion remained a core feature of performance, with organic operating margin up 64 bps despite softer sales. She pointed to EUR 900 million of efficiencies delivered since 2023, roughly half of that in FY25, and said these gains came mainly from COGS and cash savings, including finished goods inventory reduction. She noted free cash flow of EUR 1.133 billion, CapEx of EUR 656 million, strategic inventories of EUR 557 million, net debt of EUR 10.7 billion, and leverage of 3.3x; for FY26, she expects strategic investments below EUR 900 million, cash conversion improving toward circa 80%, and a significant FX headwind. She also said the tariff impact was estimated at EUR 80 million on an annualized basis and that FY26 margin defense would depend on pricing, mix, and continued efficiency actions.

Analysts pressed on whether FY26 margins could still expand despite tariff, inflation, and mix pressure; management said there is a solid plan, but it is too early to commit beyond defending margin because of COGS inflation, subdued pricing conditions in some markets, and potential mix drag from U.S. and China inventory adjustments. Questions on India focused on Maharashtra’s 50% excise increase; management said India remains a strong-growth market, but Q1 will be hit and FY26 growth could be somewhat below its usual algorithm while still strong. On the U.S., management said inventory adjustments and a new distributor setup will affect Q1, but they are encouraged by OND activation and innovation, and they believe the market gap can keep narrowing. Management also said Europe remains resilient with market-share gains or stability in many markets, though they stopped short of giving specific FY26 guidance.