* Q3 sales 1.62 bln euros, flat like-for-like
* Keeps full-year goal for 1-3 pct operating profit growth
* Buys California wine maker Kenwood Vineyards
* Looking for more bolt-on deals, no large M&A - CFO
(Recasts with CFO comments on M&A, shares)
By Dominique Vidalon
PARIS, April 24 Pernod Ricard said it
was buying Kenwood Vineyards to beef up its premium wines
portfolio in the United States, the French drinks company's
biggest market, and was looking for more small-scale
The world's second-biggest spirits group behind Britain's
Diageo said on Thursday it still expected demand in
China, where sales sank 28 percent in its financial third
quarter, to stay weak and kept a target for slower full-year
The acquisition of Sonoma Valley, California-based Kenwood,
worth less than $100 million, would allow Pernod Ricard, to join
the top 15 U.S. wine makers and gain share in a U.S. market that
Chief Financial Officer Gilles Bogaert said was "very
Pernod Ricard already owns premium wines such as Jacob's
Creek in Australia.
Since Japan's Suntory snapped up U.S bourbon specialist Beam
for $16 billion in January, there has been speculation
about more consolidation.
Analysts have said U.S. drinks company Brown Forman,
known for its Jack Daniel's Tennessee whiskey and smaller brands
including Southern Comfort and Herradura tequila, could be a
target for the likes of Pernod, Diageo or Bacardi.
"We are open to tactical acquisitions of premium brands
such as Kenwood. We are looking at other potential assets but we
are not open to large transforming deals," Pernod Ricard Chief
Financial Officer Gilles Bogaert said.
Since its last major acquisition - the purchase of Swedish
group Vin & Sprit, owner of Absolut Vodka, in 2008 for 5.7
billion euros - Pernod has focused on cutting debt.
Net debt was 8.6 billion euros at end-December 2013, giving
a net debt to EBITDA ratio of 3.6 times against 6.2 times after
the Vin & Sprit deal.
LASTING CHINA WEAKNESS
Pernod Ricard reported sales of 1.62 billion euros ($2.2
billion) in the three months ended March 31, flat year-on-year
on a like-for-like basis and slower than its 2 percent annual
growth rate in the second quarter.
That was below the analysts' average estimate of 1.2 percent
growth and reflected weakness in China where like-for-like sales
sank 28 percent after falling 18 percent in the first half, due
to destocking in response to sluggish demand.
Pernod Ricard makes 12 percent of sales and 15 percent of
profits in China. Asia accounts for around 40 percent of its
sales and 46 percent of profits.
Like rivals Diageo and Remy Cointreau, Pernod has
been hit by a Chinese government crackdown on luxury gift-giving
and personal spending by civil servants as well as by slowing
economic growth in its second-biggest market.
Pernod, the owner of Mumm champagne, Absolut vodka and
Martell cognac, warned last month that demand in China could
stay sluggish until 2015.
Recent trading updates from Diageo and Remy Cointreau have
showed further pressure on the Chinese market as the government
drive against corruption and extravagance intensified recently.
Pernod kept its forecast of underlying operating profit
growth of 1 to 3 percent for the full year to June 30, slowing
from 6 percent growth in the previous year.
Its shares were down 0.4 percent, in line with European
"We see neither improvement nor further deterioration in
China. Calendar year 2014 will stay difficult in China. The
precise timing of the recovery remains uncertain," Bogaert said.
($1 = 0.7231 Euros)
(Reporting by Dominique Vidalon, additional reporting Pascale
Denis,; Editing by Erica Billingham)