Pernod fuels fresh concern as profit misses estimates

Pernod Ricard SA, the world's second-largest distiller, said a recent improvement in the Chinese spirits market is unlikely to last as the company reported full-year profit slightly below analysts' estimates.

The market in China continues to decline at a "high single-digit" pace, Chief Executive Officer Alexandre Ricard said in an interview on Thursday, sparking concern over business in Asia, where Pernod gets more than a third of revenue.

"Given the recent volatility, we are still expecting some further decline in the short-term," he said.

Pernod has been weighed down by a crackdown on lavish spending by China, which this week cut interest rates amid a slowing economy. As demand for premium cognac has plunged, the Paris-based distiller has started pushing less expensive liquors such as Ballantine's whisky. Business in Asia improved during the first half, with sales rising 4 percent.

The distiller reported first-half profit from recurring operations of 2.24 billion euros ($2.5 billion), compared with analyst predictions of 2.26 billion euros. The profit measure rose 2 percent, excluding acquisitions, disposals and currency shifts, missing the 2.6 percent estimate compiled by Bloomberg.

Pernod took a 404 million-euro impairment charge on its Absolut vodka business due to weakness in the US. The charge equaled about one-third of sales and was "inevitable given how challenged large vodka brands are in the US", Eamonn Ferry, an analyst at Exane BNP Paribas, said in a note.