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Pernod Ricard (RIFP; Baa1, BBB+, BBB+; S) IPT 6.5Y/10Y

CONSUMER CYCLICALS
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6.5Y FV +65 (IPT+100) & 10Y +86 (+120) - coming-in line.

  • Similar to Danone on Friday, hard to get excited about RIFP's secondary. We flagged in Mid-Feb it was trading tighter than brewer curves despite its higher exposure to China (exposed to trade policy changes) - China was down 9% in Q3 on "challenging macro". Its moved wider of Heineken since but still inside Carlsberg - which we see no reason for.
  • Q3 results were weak though volumes did increase, FY guidance is left broad, medium term guidance left unch and is firmer.
  • Net leverage was at 3.3x in 1H24 - we don't see that moving close to FY23 levels (2.7x) yet - Moody's already had 2.7x at top end of its threshold - we don't expect downgrade for now - mgmt did cut back on buybacks but interim dividend did look a tad above normal last week.
  • Negative outlook from Moody's is a possibility particularly on still weak US/China sales in Q4.

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6.5Y FV +65 (IPT+100) & 10Y +86 (+120) - coming-in line.

  • Similar to Danone on Friday, hard to get excited about RIFP's secondary. We flagged in Mid-Feb it was trading tighter than brewer curves despite its higher exposure to China (exposed to trade policy changes) - China was down 9% in Q3 on "challenging macro". Its moved wider of Heineken since but still inside Carlsberg - which we see no reason for.
  • Q3 results were weak though volumes did increase, FY guidance is left broad, medium term guidance left unch and is firmer.
  • Net leverage was at 3.3x in 1H24 - we don't see that moving close to FY23 levels (2.7x) yet - Moody's already had 2.7x at top end of its threshold - we don't expect downgrade for now - mgmt did cut back on buybacks but interim dividend did look a tad above normal last week.
  • Negative outlook from Moody's is a possibility particularly on still weak US/China sales in Q4.