2013 Mar 13 — Pernod Ricard SA

Pernod Ricard SA Beverages

1

Faster growth lies ahead

● Summary: Following a recent roadshow with Pernod Ricard management and a reappraisal of the organic growth potential at the company (as well as incorporating new estimates for FX, tax rate and coupon), we raise our EPS estimates across FY13-15E by c.3-5%, and therefore stand c.2-4% above consensus. More importantly, we see FY12-13 as a period of transition from relatively slow EPS growth (c.5% per annum) to a much faster rate (13-14% per annum to FY17E), as top-line growth steadily improves, more moderate investment in overheads drives accelerated margin expansion, and the group follows a path of further financial deleverage. Its ultimate ambitions regarding potential M&A in the US remain unclear, but may yet prove a source of value added, while a Dec. 2014 P/E of 16.2x and FCF yield of 4.0% appear appealing, in our view, given the 13-14% per annum EPS growth potentially on offer.

● Operating outlook: Q2 fiscal 2013 is likely, in our view, to mark the low point for organic top-line growth at Pernod Ricard. While acceleration in growth in H2 2013 is likely to be largely technically driven (French tax issues and Chinese New Year timing), we expect more fundamental improvement over subsequent years, given: 1) the robust (and ever-more significant) growth being achieved in emerging markets; 2) the benefits of innovation efforts (especially in the US); and 3) assumed easing of economic pressures in France and Southern Europe. As a result, we estimate organic top-line growth over FY14-17 at 7-8% p.a., one of the fastest such growth rates across Beverages and the wider Staples sector. We also expect margin growth to accelerate, as moderation in sales and distribution costs combine with growth in gross margin driven by the premiumisation brand strategy.

● Our €120 share price target (prior €95) is PE- and DCF-derived: Our DCF estimate stands at €135 per share based on a WACC of 7.1% and a terminal growth rate of 3.0%. Our PE-based fair value of €105 is calculated on a target Dec. 2014 P/E of 17x applied to our cal. 2014 EPS estimate.

Buy Rating system

Current price

EUR 99.90

Absolute

Price target

EUR 120.00 12/03/2013 Paris Close Market cap EUR 26,597 m Reuters PERP.PA Bloomberg RI FP

Changes made in this note Rating Buy (no change) Price target EUR 120.00 (95.00) Chg 2013e 2014e 2015e

old Δ% old Δ% old Δ%

Sales 8758 1.1 9293 1.7 9958 2.3

EBIT 2280 2.0 2464 3.3 2696 4.2

EPS 4.86 3.2 5.53 4.6 6.25 5.5

Source: Berenberg Bank estimates

Share data

Shares outstanding (m) 266 Enterprise value (EUR m) 36,835 Daily trading volume 584,006

Performance data

High 52 weeks (EUR) 100.40 Low 52 weeks (EUR) 75.24 Relative performance to SXXP MSCI 1 month 4.2 % 3.4 % 3 months 9.7 % 2.3 % 12 months 16.2 % 10.4 %

Key data

Price/book value 2.5 Net gearing 85.3 % CAGR sales 2012-2017 7.7 % CAGR EPS 2012-2017 13.4 %

Business activities: Production and selling of alcoholic beverages including spirits and wine

Non-institutional shareholders: Ricard Family 14.27% Groupe Bruxelles Lambert 7.50%

13 March 2013

Philip Morrisey Analyst +44 20 3207 7892 [email protected]

Josh Puddle

Analyst +44 20 3207 7881 [email protected]

Y/E 30.06., EUR m 2011 2012 2013E 2014E 2015E 2016E 2017E

Sales 7,643 8,215 8,858 9,451 10,185 11,006 11,914

EBITDA 2,068 2,286 2,512 2,742 3,022 3,335 3,681

EBIT 1,909 2,114 2,327 2,544 2,809 3,105 3,432

Net profit 1,045 1,146 1,324 1,541 1,754 1,994 2,261

Y/E net debt (net cash) 9,038 9,363 8,735 8,236 7,680 7,000 6,184

EPS (reported) 3.98 4.36 5.03 5.85 6.66 7.57 8.58

EPS (recurring) 4.12 4.53 5.01 5.79 6.59 7.49 8.49

CPS 4.72 5.18 5.71 6.53 7.39 8.36 9.43

DPS 1.44 1.58 1.67 1.93 2.19 2.49 2.83

Gross margin 60.3% 61.4% 62.6% 63.3% 64.0% 64.6% 65.1%

EBITDA margin 27.1% 27.8% 28.4% 29.0% 29.7% 30.3% 30.9%

EBIT margin 25.0% 25.7% 26.3% 26.9% 27.6% 28.2% 28.8%

Dividend yield 2.2% 2.2% 1.7% 1.9% 2.2% 2.5% 2.8%

ROCE 8.7% 9.6% 10.4% 11.5% 12.4% 13.4% 14.5%

EV/sales 3.8 3.6 4.2 3.8 3.5 3.2 2.9

EV/EBITDA 13.9 12.8 14.7 13.2 11.8 10.5 9.3

EV/EBIT 15.0 13.9 15.8 14.3 12.7 11.3 10.0

P/E 15.9 15.7 19.9 17.3 15.2 13.3 11.8

Source: Company data, Berenberg Bank


2

Pernod Ricard – financial and valuation summary

Source: Company reports, Berenberg Bank estimates

Income statement (E m) Jun 12 Jun 13E Jun 14E Jun 15E Jun 16E Jun 17E Date Price Target ETR (%) Rec. EPS 5YE

Net sales 8,215 8,858 9,451 10,185 11,006 11,914 13-Mar-13 99.90 120.0 21.7 BUY 13.4%

EBITDA 2,286 2,512 2,742 3,022 3,335 3,681 Enterprise value (E m) Jun 12 Jun 13E Jun 14E Jun 15E Jun 16E Jun 17E

Depreciation (156) (168) (179) (193) (209) (226) Market cap 18,874 26,597 26,597 26,597 26,597 26,597

EBITA 2,130 2,344 2,563 2,829 3,126 3,455 plus average net debt / (cash) 9,201 9,049 8,485 7,958 7,340 6,592

Amortization of intangibles (16) (17) (18) (20) (21) (23) plus pension deficit 367 367 367 367 367 367

EBIT 2,114 2,327 2,544 2,809 3,105 3,432 plus other liabilities 826 826 826 826 826 826

Net financial charges (509) (500) (435) (409) (378) (341) plus minorities 424 360 360 360 360 360

Profit before exceptionals 1,605 1,827 2,109 2,400 2,727 3,091 less associates / other assets (364) (364) (364) (364) (364) (364)

Exceptionals (184) (101) 0 0 0 0 Enterprise value 29,328 36,835 36,271 35,744 35,126 34,378

Profit before tax 1,421 1,726 2,109 2,400 2,727 3,091 Valuation (x) Dec 11 Dec 12E Dec 13E Dec 14E Dec 15E Dec 16E

Tax (247) (384) (548) (624) (709) (804) EV / Net sales 3.7 3.9 4.0 3.7 3.4 3.0

Tax rate (%) 17.4 22.2 26.0 26.0 26.0 26.0 EV / EBITDA 13.4 13.7 13.9 12.5 11.2 9.9

Tax rate before exceptionals (%) 23.5 26.0 26.0 26.0 26.0 26.0 EV / EBIT 14.5 14.9 15.0 13.5 12.0 10.7

Associates (1) 0 0 0 0 0 EV / Invested capital 1.3 1.5 1.6 1.6 1.5 1.5

Minorities / discontinued (27) (18) (20) (22) (24) (27) P / EPS before exceptionals (fd) 15.8 17.8 18.6 16.2 14.3 12.6

Net profit 1,146 1,324 1,541 1,754 1,994 2,261 P / CEPS before exceptionals (fd) 13.8 15.6 16.4 14.4 12.7 11.3

Net profit before exceptionals 1,201 1,334 1,541 1,754 1,994 2,261 P / Book value 1.8 2.1 2.3 2.1 1.9 1.7

EPS (EUR) 4.36 5.03 5.85 6.66 7.57 8.58 FCF yield (%) 4.8 3.7 3.3 4.0 4.7 5.5

EPS before exceptionals (fd, EUR) 4.53 5.01 5.79 6.59 7.49 8.49 Dividend yield (%) 2.2 1.9 1.8 2.1 2.3 2.7

CEPS before exceptionals (fd, EUR) 5.18 5.71 6.53 7.39 8.36 9.43 Growth rates (%) Jun 12 Jun 13E Jun 14E Jun 15E Jun 16E Jun 17E

Dividend per share (EUR) 1.58 1.67 1.93 2.19 2.49 2.83 Net sales 7.5 7.8 6.7 7.8 8.1 8.3

Average number of shares (fd, m) 265.1 266.2 266.2 266.2 266.2 266.2 EBITDA 10.5 9.9 9.2 10.2 10.4 10.4

Cash flow (E m) Jun 12 Jun 13E Jun 14E Jun 15E Jun 16E Jun 17E EBIT 10.7 10.1 9.3 10.4 10.5 10.5

EBIT 2,114 2,327 2,544 2,809 3,105 3,432 Profit before exceptionals 11.5 13.8 15.4 13.8 13.6 13.3

Depreciation and amortization 172 185 198 213 230 249 Net profit before exceptionals 10.0 11.1 15.5 13.8 13.7 13.4

Working capital (55) (242) (222) (276) (308) (341) EPS before exceptionals (fd) 9.9 10.6 15.5 13.8 13.7 13.4

Other (302) (317) (332) (350) (371) (394) Dividend per share 9.7 5.6 15.5 13.8 13.7 13.4

Operating cash flow 1,929 1,954 2,188 2,396 2,657 2,946 Average number of shares 0.1 0.2 0.0 0.0 0.0 0.0

Dividends (associates / minorities) (35) (14) (15) (16) (18) (20) Financial ratios (%) Jun 12 Jun 13E Jun 14E Jun 15E Jun 16E Jun 17E

Net interest (516) (500) (435) (409) (378) (341) EBITDA / net sales 27.8 28.4 29.0 29.7 30.3 30.9

Taxation (288) (380) (439) (499) (567) (643) EBIT / net sales 25.7 26.3 26.9 27.6 28.2 28.8

Capital expenditure (net) (271) (340) (310) (334) (361) (391) EBITDA interest cover (x) 4.5 5.0 6.3 7.4 8.8 10.8

Acquisition / sale fixed assets 20 40 10 10 10 10 EBIT interest cover (x) 4.2 4.7 5.8 6.9 8.2 10.1

Pension deficit payments 0 0 0 0 0 0 Dividend cover (x) 2.9 3.0 3.0 3.0 3.0 3.0

Free cash flow 839 761 999 1,147 1,342 1,562 Capex / net sales 3.3 3.8 3.3 3.3 3.3 3.3

Dividends (376) (434) (451) (541) (613) (696) Free cash flow / EBITDA 37 30 36 38 40 42

Acquisitions / disposals (37) 103 0 0 0 0 FCF / net profit before exceptionals 70 57 65 65 67 69

Cash flow before financing 426 429 548 606 730 866 Working capital / net sales 38 38 38 38 38 38

Shares issued 0 0 0 0 0 0 Net debt / EV (%) 32 24 23 21 20 18

Shares repurchased (47) (50) (50) (50) (50) (50) Net debt / EBITDA (x) 4.1 3.5 3.0 2.5 2.1 1.7

Other (including exchange) (704) 249 0 0 0 0 Organic net sales growth (%) Jun 12 Jun 13E Jun 14E Jun 15E Jun 16E Jun 17E

Net cash flow (325) 628 498 556 680 816 France (0.5) (7.8) 0.0 1.5 3.0 3.0

Opening net (debt) / cash (9,038) (9,363) (8,735) (8,236) (7,680) (7,000) Other Europe 2.5 0.5 1.9 3.0 4.0 4.8

Closing net (debt) / cash (9,363) (8,735) (8,236) (7,680) (7,000) (6,184) Americas 5.9 7.0 6.4 6.8 7.2 7.3

ROIC / ROE (%) Jun 12 Jun 13E Jun 14E Jun 15E Jun 16E Jun 17E Asia Pacific / Rest of World 15.2 12.1 11.8 12.0 11.3 11.1

Working capital 3,087 3,329 3,551 3,827 4,135 4,476 Organic net sales growth 7.6 5.9 7.0 7.8 8.1 8.3

Net tangible fixed assets 1,923 1,351 1,539 1,769 1,990 2,200 Divisional estimates (E m) Jun 12 Jun 13E Jun 14E Jun 15E Jun 16E Jun 17E

Operating invested capital (E m) 5,010 4,679 5,090 5,596 6,125 6,676 Net sales 8,215 8,858 9,451 10,185 11,006 11,914

Goodwill / other intangibles 17,827 17,338 17,320 17,300 17,278 17,255 Gross profit (3,168) (3,315) (3,468) (3,671) (3,901) (4,159)

Invested capital (E m) 22,837 22,017 22,410 22,896 23,403 23,931 A&P (1,571) (1,712) (1,845) (2,005) (2,179) (2,370)

NOPAT (E m) 1,617 1,722 1,883 2,079 2,298 2,539 Overheads (1,362) (1,505) (1,593) (1,701) (1,821) (1,953)

ROIC (pre tax, average operating IC) 43.4 48.0 52.1 52.6 53.0 53.6 EBIT 2,114 2,327 2,544 2,809 3,105 3,432

ROIC (post tax, average IC) 7.3 7.7 8.5 9.2 9.9 10.7 France 181 156 156 158 163 167

WACC 7.1 7.1 7.1 7.1 7.1 7.1 Rest Of Europe 470 460 470 491 521 558

ROIC / WACC (x) 1.0 1.1 1.2 1.3 1.4 1.5 Americas 582 636 672 722 783 849

ROE 11.7 12.2 13.4 13.8 14.2 14.5 Asia Pacific / Rest of World 880 1,075 1,247 1,437 1,638 1,857


3

Investment case

The key aspect of the investment case for Pernod Ricard, as we perceive it, is that FY12-13 represents an inflection point, from slow to faster EPS growth. When the same inflection of EPS growth occurred at Diageo in FY09 (albeit for different reasons), the subsequent EPS acceleration proved a strong driver of share price performance, as we expect to see repeated at Pernod Ricard. Figure 1: Diageo – Consensus EPS, 2003-15E Figure 2: Pernod Ricard – Consensus EPS,

2003-15E

Source: Datastream Source: Datastream

Figure 3: Diageo – Actual Share Price, 2001-2013 Figure 4: Pernod Ricard – Actual Share Price,

2001-2013


Figure 5: Diageo – YR 1 Fwd P/E, 2001-13E Figure 6: Pernod Ricard – YR 1 Fwd P/E, 2001-

13E


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4

In the case of Pernod Ricard, EPS growth in the five years to FY12 averaged only about 5%, whereas in the three years after FY12 consensus puts EPS growth at a CAGR of 12.3%. Our own estimate of EPS CAGR over FY12-15E stands at 13.2%, and as slower growth in FY13 (still an investment year for sales and distribution costs and likely to mark the low, in our view, of deterioration in Western Europe) drops out, then we estimate Pernod’s EPS CAGR over FY13-17E at 14.1%. In our view, this inflection point, and the degree of growth likely thereafter, is not fully appreciated by the market. If achieved, it should prove a driver of significant share price upside for Pernod Ricard. Arguably, therefore, the investment case revolves around three issues: why historic growth has been limited; why we expect growth to accelerate; and what the risks to the growth outlook might be.

Lack of historic growth

In our view, four factors explain why historic EPS growth has been limited, most of which we do not expect to repeat going forward.

Financing Vin & Sprit at the low end of the yield curve – The acquisition of Vin & Sprit (Absolut vodka) in 2008 was initially funded wholly by debt and at the low end of the yield curve, i.e. at relatively low rates. As this debt was refinanced by longer-dated bonds, so the coupon on net debt rose, prompting, we believe, consensus downgrades. With bonds now representing c.80% of debt and the group coupon guided to 5.4% in FY13 and 5.0% in FY14, this effect should have ceased.

Downgrades prompted by the global financial crisis – Pernod’s organic EBIT performance during the 2008-09 crisis was very similar to that of Diageo, but Pernod’s much higher leverage resulted in sharper EPS downgrades. Hopefully, a crisis of this magnitude will not repeat, and, in any event, Pernod is likely not to return to the c.6x leverage seen at this time given its public commitment to retain investment grade rating.

Vin & Sprit acquisition EPS benefits were diluted by a rights issue – Pernod’s decision to subsequently refinance part of the Vin & Sprit acquisition cost with a rights issue in 2009 would have proven slightly dilutive to consensus EPS estimates.

Pernod invested “ahead of the curve” in A&P and distribution – Anticipating economic recovery after 2009 and wanting to boost both its distribution footprint in emerging markets and its innovation capability, Pernod deliberately invested in A&P and overhead costs ahead of net sales. In the case of overhead costs, at least, this process should finish in FY13.

The removal or lessening of these factors, combined with the intrinsic growth which we believe Pernod Ricard to be capable of achieving, is why we anticipate accelerated EPS growth from FY12-13 onwards.


5

Growth driver – top line

In a previous report, Pernod Ricard: It’s not all over yet for leverage, dated 23 April 2012, we discussed the outlook for Pernod’s US and emerging market spirits businesses and concluded that structural organic top-line growth was likely at a rate of c.7-8% per annum. As Pernod entered FY13, however, it became apparent that the deterioration in consumer spending in Southern Europe, combined with the effects of a sharp tax increase in France and a broad-based slow-down in emerging markets (see below), meant that this year was likely to see organic top-line growth below our original estimates, and we currently stand at 5.9% in FY13. However, we still think that Pernod is positioned to grow organic top line at a 7-8% annual rate: 1) as emerging markets become a larger contributor to group EBIT; 2) with recent evidence that strong growth is being sustained in key markets such as China and India; 3) as Pernod has had success in accelerating top-line performance in the US (see snapshot below); and 4) due to our expectation that pressures in Europe should ease over time. Figure 7: Pernod Ricard: organic net sales growth in emerging markets (%)

Source: Company reports

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http://www.berenberg.de/cgi-bin/content/content.cgi?rm=show_doc&session_id=39a1a8df815ad1ed9e1b5fbc5e77727c&sb_userid=0&sb_eventid=0


6

Figure 8: US Pernod – brands by price point, 52 week growth and size, 2012

Source: The Nielsen Company

Our key estimates in this regard are shown in the table below and in this note have been raised by c.60-80 bps per annum from those assumed previously. Figure 9: Pernod Ricard – estimated organic net sales growth in emerging markets, FY10-17E (%)


Growth driver – margins

One of the key elements of Pernod’s operational strategy is its focus on “premiumising” its brand portfolio, both by growing its portfolio of top 14 brands faster than the rest of the portfolio (given the 71% gross margin achieved here, versus the group average of 61%) and by premiumising within this portfolio (as evidenced below by the faster growth of its higher margin whisky brands within its top 14 portfolio) as well as through its innovation efforts.

Absolut

Ballantine's

Beefeater

Chivas Regal

Fris

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Jameson

Kahlua

Kahlua cocktails

Malibu

Malibu cocktails

Martell

Presidente

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Glenlivet

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Year end June (%) 2010 2011 2012 2013E 2014E 2015E 2016E 2017E

Central & Eastern Europe (5.1) 9.0 16.0 12.0 12.0 11.0 10.0 10.0

Latin America 16.6 9.6 7.5 5.5 7.0 8.0 10.0 10.0

China 14.0 23.0 24.0 19.0 16.0 16.0 15.0 15.0

India 28.0 33.0 27.0 16.5 16.0 16.0 15.0 15.0

Other Asia Pacific / Rest of World 3.2 14.5 9.5 9.4 10.0 10.0 9.0 8.0

Group organic net sales growth (%) 1.8 6.5 7.6 5.9 7.0 7.8 8.1 8.3


7

Figure 10: Pernod Ricard’s top 14 spirits brands organic net sales growth versus retail price per case, fiscal 2007-12 (%)


On a recent roadshow with the senior management of Pernod Ricard (feedback from which can be found as Appendix 1), it was clear that the group intends to moderate investment in sales and distribution overheads after FY13. Combined with gross margin expansion driven by the premiumisation strategy noted above – which reached an impressive +146 bps underlying in H1 2013, for example – we expect this to result in c.60 bps per annum of EBIT margin expansion after FY13 (as compared to our previous expectation of 40–60 bps). Figure 11: Pernod Ricard - estimated organic EBIT margin expansion, FY06-17E (bps)


Growth driver – de-leverage

On a number of occasions, including the roadshow that we attended recently, Pernod management has noted that it expects to focus on debt de-leverage over the next two to three years, although bolt-on deals (“a few hundred million euros”) will be considered.

Martell

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Jameson

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Gross margin 55.5 55.7 57.2 58.4 59.6 60.3 61.4 62.6 63.3 64.0 64.6 65.1

A&P (17.1) (17.1) (17.9) (17.2) (17.8) (18.9) (19.1) (19.3) (19.5) (19.7) (19.8) (19.9)

Gross margin after A&P 38.4 38.6 39.3 41.2 41.7 41.5 42.3 43.3 43.8 44.3 44.8 45.2

Overheads / other (17.7) (16.1) (16.2) (15.6) (16.4) (16.5) (16.6) (17.0) (16.9) (16.7) (16.5) (16.4)

EBIT margin (%) 20.7 22.5 23.1 25.6 25.3 25.0 25.7 26.3 26.9 27.6 28.2 28.8

Gross margin 73 59 128 (18) 123 87 31 81 69 66 59 54

A&P (83) (19) (61) 115 (57) (71) 2 (11) (18) (16) (11) (10)

Gross margin after A&P (10) 40 67 96 66 16 33 71 50 50 48 44

Overheads / other na 170 32 (6) (17) 13 2 (40) 15 15 16 15

EBIT margin growth (bps) 50 210 99 90 49 29 35 31 65 66 64 59

Historic Estimates


8

On our estimates, this adds c.300 bps of additional EPS growth if achieved as we expect. Figure 12: Pernod Ricard – estimated net debt/EBITDA, FY05-17E (x)


Figure 13: Comparison of adjusted operating free cash flow at Diageo and Pernod Ricard, fiscal 2005-12 (% EBITDA)


Figure 14: Comparison of adjusted free cash flow at Diageo and Pernod Ricard, fiscal 2005-12 (% EBITDA)


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9

M&A “risk”?

As will appear evident from the roadshow feedback detailed later, Pernod does appear to have the ambition to expand in scale in the US, once the two to three year deleverage process has been concluded. While market attention has focused on the potential for an acquisition of Beam (in whole or in part), in our view Pernod will consider other potential deals (key US competitors are shown below), some of which, e.g. Brown-Forman, are likely to be considered much more attractive from a strategic standpoint and notwithstanding the challenges of executing such. To the extent that Pernod may consider issuing equity as a potential acquisition currency, e.g. to family shareholders, it would seem advantageous to drive strong share price appreciation by delivering the combination of organic growth and financial deleverage discussed above, and which forms the basis of our expectation of accelerated EPS growth from Pernod Ricard going forward. Figure 15: US spirit companies – growth rates, price points and size, Dec 2012

Source: The Nielsen Company

Diageo

Beam Bacardi

Pernod RicardBrown-Forman

Sazerac

Heaven Hill

Campari

Constellation Brands

Private label

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10

Estimates

In this note, we revise earnings estimates for Pernod Ricard as shown below. These revisions are prompted by revised views as to organic top-line and EBIT margin growth, FX impact, coupon on net debt and tax rate. Full details of these estimates can be found in Appendix 2, but we stand c.2-4% above consensus, as shown below. Figure 16: Pernod Ricard – Berenberg revised pre exceptional EPS estimates vs. consensus (€)

Source: Company reports, Bloomberg, Berenberg Bank estimates

Valuation

In calculating our Pernod Ricard share price target we endeavour to capture both fundamental valuation and typical market practice, and thus use the average of two valuation methods.

The first is a DCF analysis, which suggests fair value at €135.0 per share based on a WACC of 7.1%, beta of 0.9, equity market risk premium of 5.0% and a terminal value sales growth of 3.0%.

The second is a P/E-based valuation derived by applying a premium (of about 50%, given faster anticipated earnings growth) to the benchmark DJ Stoxx 600 December 2014 PE multiple of about 11.3x, which, at implicit 17x P/E, suggests a fair value at €104.9 per share.

The average of these two methods provides our share price target of €120.0, as depicted below. Figure 17: Pernod Ricard – derivation of share price target

Source: Berenberg Bank estimates

Year end June 2012 2013E 2014E 2015E 2016E 2017E CAGR 12-16E

Berenberg estimate (€) 4.53 5.01 5.79 6.59 7.49 8.49

% growth 9.9 10.6 15.5 13.8 13.7 13.4 13.4%

Consensus estimate (€) 4.53 4.97 5.63 6.41 7.22 8.31

% difference 0.0 0.8 2.8 2.7 3.7 2.2 12.4%

Berenberg prior estimate (€) 4.53 4.86 5.53 6.25 7.11 8.10

% revision 0.0 3.2 4.6 5.5 5.3 4.8

Per share in Euros

DCF value (WACC 7.1%, terminal sales growth 3.0%) 135.0

PE value (50% premium to Dec 11 market PE of 11.3x) 104.9

Average 120.0


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Appendix 1 – Investor roadshow feedback

Summary: Berenberg recently hosted an investor roadshow with the senior management of Pernod Ricard (including Alexandre Ricard, the COO) in Frankfurt. Key highlights of this commentary can be found below.

The vision: Global leadership status in terms of spirits sales value is still the “vision” for Pernod Ricard. Organic growth is targeted to be ahead of the market, driven by: 1) premiumisation (price and mix); 2) innovation (“the fourth big bang”, along with the Seagram, Allied Domecq and Absolut acquisitions); and 3) expansion into new territories (both geographic and new consumers/occasions).

Strategic emphasis: The last 12 years have been about integrating acquisitions and route-to-market efficiencies, but the last two-to-three years have been much more about stepping up structure costs and innovation. The group has over 300 innovation projects in the pipeline (far in excess of the position five years ago), including over 50 in the US (e.g. Malibu Red, Black and the about to be launched Malibu Island Spice).

US: Pernod no longer regards itself as being sub-scale in the US, but it is “under exposed”, given the attractive growth prospects of that market. The local mood was described as “positive”, and both on- and off-premise channels are growing. Absolut’s price increase is on test in six states (25% of volume), and Pernod should know in the next couple of months whether it is being accepted by the consumer, in which case it will roll out the increase to the other states, or not. It sees the US effectively as an “emerging market”, given the demographic trends.

Growth outlook: Pernod’s expectation is that organic net sales growth in emerging markets will remain double digit, with low single-digit growth in mature markets.

China: Pernod covers c.500 cities, but business is heavily skewed to Tier 1/Tier 2 cities, so it plans to increase its presence in Tier 3/Tier 4. Martell’s 27% organic net sales growth in H1 2013 is “exceptional” and will not be maintained long-term (though mid-teens growth should be). The gifting cut-back was more visible in scotch than cognac (and here only at the highest end, e.g. Royal Salute). Martell and scotch are the big growth drivers right now, but business over time will move more towards the next growth drivers (Absolut; wine, especially Jacob’s Creek; and champagne). Pernod does not feel much pressure to enter the baijiu category.

France: Guidance for FY13 is “pretty clear”; EBIT was down by EUR24m in H1 FY13, but Pernod anticipates that this will be EUR25m lower for the full year. Ricard was hit disproportionately by the tax hike (because it is 45% ABV), so volumes are lower, but it is gaining share and a number of other brands are growing, such as Havana Club and Absolut. Pernod does not think that French spirits will evolve like Spain, i.e. decline at 4-5% each year. Its strategy is to keep investing in strategic brands (its A&P in France is ring fenced), while reducing A&P and structure costs elsewhere.

Structure costs: Pernod is coming to the end (in FY13) of the cycle of its step-up in structure costs; thereafter, these should grow by less than net sales. Investments in expanded marketing teams, its Breakthrough Innovation Group (BIG) and the Pernod Ricard University have all been made by now.

Africa: Over the past 18 months, Pernod has hired over 100 people (mainly sales and marketing) in Africa in six markets (Namibia, Kenya, Ghana, Angola, Nigeria, Morocco), and this business is already profitable. The supply chain and


12

infrastructure is entirely outsourced.

M&A: Over the next two-to-three years Pernod will consider bolt-on deals (several hundred million euros) if these arise. Thereafter, i.e. in the medium to long term, it is “not ruling anything out” in terms of M&A and “all bets are on”, though any deal must create value. In any event, Pernod will remain investment grade. In the US, if there are opportunities to increase scale, Pernod will look at these.

Absolut: There is not at all the same pressure now as there was in 2008 when the company acquired Absolut. Back then, Pernod could not achieve its global leadership vision with a gap in vodka, the industry’s largest segment. Pernod was sub-scale in the US, the spirits industry’s largest EBIT pool, and its existing business was too skewed to cash consuming brown spirits/ageing stocks.

Cuervo: Pernod is not in talks with Cuervo. Its understanding is that the brand is not currently for sale, but if the brand becomes available it is something Pernod would consider.

Bolt-on deals. Pernod remains active here, having recently formed a joint venture (with a call option to obtain control) with Avión tequila in the US, having acquired the Helan Mountain local red wine business in China, and with the recent cognac acquisition (which boosts its ageing eaux de vie stocks).

Cash flow: Pernod’s reduction in H1 FY13 free cash flow was mainly due to technical effects in France (comparison to stocking up in the prior year), and to comparison to the prior year which also saw a “huge effort” at cash flow optimisation in Asia, i.e. later payments to suppliers. The full-year FY13 will provide a much better basis for assessing Pernod’s FCF performance: some of this working capital outflow will reverse in H2 FY13, and thereafter working capital should grow in line with net sales.

Leverage: Investors should expect Pernod’s 3.8x leverage to continue to decline, subject to the timing of any bolt-on deals.

The Ricard family: The family’s principal concern is to ensure that management continues to add value at the company, as measured by cash generation and earnings growth. Thereafter, the role of this “reference” shareholder is to support the strategy developed by the management team, with the vision of becoming industry leader. The family is also supportive of the existing dividend policy (about a one-third pay-out ratio), even though this is less than that seen at other beverage companies and in the CAC 40.


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Appendix 2 – Detailed financial estimates

Figure 18: Pernod Ricard – divisional net sales and EBIT, FY11-17E (€m)


2011 2012 2013E 2014E 2015E 2016E 2017E

France 750 746 688 688 698 719 741

Other Europe 2,114 2,137 2,154 2,177 2,243 2,332 2,444

Americas 2,068 2,167 2,358 2,496 2,665 2,857 3,065

Asia Pacific / Rest of World 2,711 3,165 3,659 4,089 4,580 5,097 5,664

Net sales 7,643 8,215 8,858 9,451 10,185 11,006 11,914

France 189 181 156 156 158 163 167

Other Europe 479 470 460 470 491 521 558

Americas 558 582 636 672 722 783 849

Asia Pacific / Rest of World 684 880 1,075 1,247 1,437 1,638 1,857

EBIT 1,909 2,114 2,327 2,544 2,809 3,105 3,432

France 25.2 24.3 22.7 22.7 22.7 22.7 22.6

Other Europe 22.7 22.0 21.4 21.6 21.9 22.3 22.8

Americas 27.0 26.9 27.0 26.9 27.1 27.4 27.7

Asia Pacific / Rest of World 25.2 27.8 29.4 30.5 31.4 32.1 32.8

EBIT margin (%) 25.0 25.7 26.3 26.9 27.6 28.2 28.8

France 4.2 (0.5) (7.8) 0.0 1.5 3.0 3.0

Western Europe (2.0) (1.0) (3.4) (2.0) (0.5) 1.0 2.0

Central & Eastern Europe 9.0 16.0 12.0 12.0 11.0 10.0 10.0

Other Europe 0.2 2.5 0.5 1.9 3.0 4.0 4.8

North America 2.0 na 7.9 6.0 6.0 5.5 5.5

Latin America 9.6 na 5.5 7.0 8.0 10.0 10.0

Americas 4.6 5.9 7.0 6.4 6.8 7.2 7.3

Australia / New Zealand (3.0) na 1.5 3.0 3.0 3.0 3.0

China 23.0 24.0 19.0 16.0 16.0 15.0 15.0

India 33.0 na 16.5 16.0 16.0 15.0 15.0

South Korea 3.0 (2.0) 1.3 2.0 2.0 2.0 2.0

Other Asia Pacific / Rest of World 14.5 na 9.4 10.0 10.0 9.0 8.0


Organic net sales growth (%) 6.5 7.6 5.9 7.0 7.8 8.1 8.3

France (64) (67) (70) 0 (0) (0) (10)

Other Europe 45 24 (55) 20 30 45 50

Americas (48) (58) (25) (0) 20 30 30

Asia Pacific / Rest of World 88 122 110 110 90 75 65

Organic EBIT margin growth (basis points) 29 35 31 65 66 64 59

France 1.6 (3.2) (10.5) 0.0 1.5 3.0 2.5

Other Europe 2.2 3.5 (2.1) 2.9 4.5 6.1 7.1

Americas 2.8 3.6 6.0 6.4 7.5 8.4 8.4


Organic EBIT growth (%) 7.7 9.1 7.2 9.7 10.4 10.5 10.5


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Figure 19: Pernod Ricard – key financial ratios, FY11-17E (%)


2011 2012 2013E 2014E 2015E 2016E 2017E

EBITDA margin on net sales 27.1 27.8 28.4 29.0 29.7 30.3 30.9

EBIT margin on net sales 25.0 25.7 26.3 26.9 27.6 28.2 28.8

Depreciation as % of net sales 1.8 1.9 1.9 1.9 1.9 1.9 1.9

EBITDA interest cover (x) 4.4 4.5 5.0 6.3 7.4 8.8 10.8

EBIT interest cover (x) 4.1 4.2 4.7 5.8 6.9 8.2 10.1

Dividend payout ratio (%) 35 35 33 33 33 33 33

Dividend cover (x) 2.9 2.9 3.0 3.0 3.0 3.0 3.0

ROIC (pre tax) 8.7 9.6 10.4 11.5 12.4 13.4 14.5

ROIC (post tax) 6.7 7.3 7.7 8.5 9.2 9.9 10.7

ROE 11.6 11.7 12.2 13.4 13.8 14.2 14.5

Operating cash flow to EBITDA (%) 90 84 78 80 79 80 80

Free cashflow to EBITDA (%) 43 37 30 36 38 40 42

FCF to net profit before except. / goodwill (%) 81 70 57 65 65 67 69

Capex to sales (%) 2.9 3.3 3.8 3.3 3.3 3.3 3.3

Capex to depreciation (x) 1.4 1.6 1.8 1.6 1.6 1.6 1.6

Working capital % of net sales 38.3 37.6 37.6 37.6 37.6 37.6 37.6

Book value per share 36 42 42 46 51 56 62

Net debt / EBITDA (x) 4.4 4.1 3.5 3.0 2.5 2.1 1.7

Net debt / group funds (%) 95 85 80 68 58 47 38

Net debt / EV (%) 31 32 24 23 21 20 18


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Figure 20: Pernod Ricard – earnings estimates, FY 2011-17E (%)

Source: Company reports, Berenberg Bank estimates Figure 21: Pernod Ricard – key financial growth rates, FY 2011-17E (%)


2011 2012 2013E 2014E 2015E 2016E 2017E

Net sales 7,643 8,215 8,858 9,451 10,185 11,006 11,914

EBITDA 2,068 2,286 2,512 2,742 3,022 3,335 3,681

Depreciation (141) (156) (168) (179) (193) (209) (226)

EBITA 1,928 2,130 2,344 2,563 2,829 3,126 3,455

Amortization of intangibles (18) (16) (17) (18) (20) (21) (23)

EBIT 1,909 2,114 2,327 2,544 2,809 3,105 3,432

Net financial charges (469) (509) (500) (435) (409) (378) (341)

Profit before exceptionals 1,440 1,605 1,827 2,109 2,400 2,727 3,091

Exceptionals (45) (184) (101) 0 0 0 0

Profit before tax 1,395 1,421 1,726 2,109 2,400 2,727 3,091

Tax on profit before exceptionals (317) (377) (475) (548) (624) (709) (804)

Tax on exceptionals (2) 130 91 0 0 0 0

Tax (319) (247) (384) (548) (624) (709) (804)

Tax rate before exceptionals (%) 22.0 23.5 26.0 26.0 26.0 26.0 26.0

Tax rate (%) 22.9 17.4 22.2 26.0 26.0 26.0 26.0

Associates / discontinued / other 1 (1) 0 0 0 0 0

Minorities (32) (27) (18) (20) (22) (24) (27)

Net profit 1,045 1,146 1,324 1,541 1,754 1,994 2,261

Net profit before exceptionals 1,092 1,201 1,334 1,541 1,754 1,994 2,261

Dividends (368) (392) (434) (451) (541) (613) (696)

Retained earnings 677 754 890 1,090 1,213 1,381 1,565

EPS 3.98 4.36 5.03 5.85 6.66 7.57 8.58

EPS before exceptionals 4.16 4.57 5.06 5.85 6.66 7.57 8.58

EPS (fd) 3.94 4.32 4.97 5.79 6.59 7.49 8.49

EPS before exceptionals (fd) 4.12 4.53 5.01 5.79 6.59 7.49 8.49

CEPS before exceptionals (fd) 4.72 5.18 5.71 6.53 7.39 8.36 9.43

Dividend per share 1.44 1.58 1.67 1.93 2.19 2.49 2.83

Average number of shares (m) 262.7 262.9 263.5 263.5 263.5 263.5 263.5

Average number of shares (fd, m) 265.0 265.1 266.2 266.2 266.2 266.2 266.2

2011 2012 2013E 2014E 2015E 2016E 2017E

Net sales 7.9 7.5 7.8 6.7 7.8 8.1 8.3

EBITDA 5.8 10.5 9.9 9.2 10.2 10.4 10.4

EBITA 6.0 10.5 10.1 9.3 10.4 10.5 10.5

EBIT 6.4 10.7 10.1 9.3 10.4 10.5 10.5

Profit before exceptionals 10.9 11.5 13.8 15.4 13.8 13.6 13.3

Net profit 9.9 9.7 15.5 16.4 13.8 13.7 13.4

Net profit before exceptionals / goodwill 9.1 10.0 11.1 15.5 13.8 13.7 13.4

EPS 9.9 9.6 15.3 16.4 13.8 13.7 13.4

EPS before exceptionals / goodwill 9.1 9.9 10.9 15.5 13.8 13.7 13.4

EPS (fd) 9.8 9.6 15.1 16.4 13.8 13.7 13.4

EPS before exceptionals / goodwill (fd) 9.0 9.9 10.6 15.5 13.8 13.7 13.4

CEPS (fd) 8.3 9.6 10.2 14.4 13.1 13.1 12.8

Dividend per share 7.5 9.7 5.6 15.5 13.8 13.7 13.4

Average number of shares (m) (0.0) 0.1 0.2 0.0 0.0 0.0 0.0


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Figure 22: Pernod Ricard – cash flow estimates, FY11-17E (€m)


2011 2012 2013E 2014E 2015E 2016E 2017E

EBIT 1,909 2,114 2,327 2,544 2,809 3,105 3,432

Depreciation and amortization 159 172 185 198 213 230 249

Working capital 32 (55) (242) (222) (276) (308) (341)

Other items (232) (302) (317) (332) (350) (371) (394)

Operating cash flow 1,868 1,929 1,954 2,188 2,396 2,657 2,946

Dividends from associates 0 0 0 0 0 0 0

Dividends paid to minorities (38) (35) (14) (15) (16) (18) (20)

Net interest (478) (516) (500) (435) (409) (378) (341)

Taxation (256) (288) (380) (439) (499) (567) (643)

Capital expenditure (223) (271) (340) (310) (334) (361) (391)

Sale of tangible fixed assets 11 20 40 10 10 10 10

Pension deficit payments

Free cash flow 884 839 761 999 1,147 1,342 1,562

Dividends (351) (376) (434) (451) (541) (613) (696)

Acquisitions / disposals 152 (37) 103 0 0 0 0

Cash flow before financing 685 426 429 548 606 730 866

Shares issued 0 0 0 0 0 0 0

Acquisition / disposal of treasury shares (70) (47) (50) (50) (50) (50) (50)

Exchange impact 932 (710) 249 0 0 0 0

Other items (1) 6 0 0 0 0 0

Net cash flow 1,546 (325) 628 498 556 680 816

Opening net (debt) / cash (10,584) (9,038) (9,363) (8,735) (8,236) (7,680) (7,000)

Closing net (debt) / cash (9,038) (9,363) (8,735) (8,236) (7,680) (7,000) (6,184)


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Figure 23: Pernod Ricard – balance sheet estimates, FY11-17E (€m)

Source: Company reports, Berenberg Bank estimates Figure 24: Pernod Ricard – return on capital estimates, FY 2011-17E (€m)


2011 2012 2013E 2014E 2015E 2016E 2017E

Cash and marketable securities 774 787 787 787 787 787 787

Accounts receivable 1,262 1,318 1,421 1,516 1,634 1,766 1,911

Inventory 3,875 4,295 4,631 4,941 5,325 5,754 6,229

Total other current assets 155 121 130 139 150 162 175

Current assets 6,066 6,521 6,970 7,384 7,896 8,469 9,103

Net tangible fixed assets 1,805 1,923 1,351 1,539 1,769 1,990 2,200

Investments 6 18 18 18 18 18 18

Other financial assets 178 294 294 294 294 294 294

Total financial assets 8,055 8,756 8,633 9,235 9,978 10,770 11,614

Goodwill 4,746 5,126 5,010 5,010 5,010 5,010 5,010

Other intangible assets 11,291 12,234 11,861 11,843 11,823 11,801 11,778

Other non - current assets 117 193 193 193 193 193 193

Total assets 24,209 26,309 25,697 26,280 27,003 27,775 28,595

Accounts payable 1,884 2,130 2,297 2,450 2,641 2,854 3,089

Short - term debt 405 880 880 880 880 880 880

Total other current liabilities 398 519 560 597 643 695 753

Current liabilities 2,687 3,529 3,736 3,927 4,164 4,429 4,722

Long - term debt 9,407 9,270 8,642 8,143 7,587 6,907 6,091

Net deferred tax liability 1,198 1,161 1,161 1,161 1,161 1,161 1,161

Other non - current liabilities 201 191 191 191 191 191 191

Total provisions 1,220 1,186 994 785 554 298 16

Total liabilities 14,713 15,337 14,724 14,208 13,658 12,987 12,181

Minority interest 190 169 174 178 184 190 196

Common equity 9,306 10,803 10,799 11,894 13,162 14,598 16,218

Liabilities and shareholders funds 24,209 26,309 25,697 26,280 27,003 27,775 28,595

2011 2012 2013E 2014E 2015E 2016E 2017E

Working capital 2,926 3,087 3,329 3,551 3,827 4,135 4,476

Net tangible fixed assets 1,805 1,923 1,351 1,539 1,769 1,990 2,200

Operating invested capital 4,731 5,010 4,679 5,090 5,596 6,125 6,676

Intangible assets 16,037 17,360 16,871 16,853 16,833 16,811 16,788

Goodwill / brands amortized 485 467 467 467 467 467 467

Invested capital 21,253 22,837 22,017 22,410 22,896 23,403 23,931

EBIT 1,909 2,114 2,327 2,544 2,809 3,105 3,432

Tax (420) (497) (605) (662) (730) (807) (892)

NOPAT 1,489 1,617 1,722 1,883 2,079 2,298 2,539

Average operating invested capital 4,689 4,871 4,845 4,885 5,343 5,860 6,400

Average invested capital 22,069 22,045 22,427 22,214 22,653 23,149 23,667

ROIC (operating) 40.7 43.4 48.0 52.1 52.6 53.0 53.6

ROIC (pre tax) 8.7 9.6 10.4 11.5 12.4 13.4 14.5

ROIC (post tax) 6.7 7.3 7.7 8.5 9.2 9.9 10.7

ROIC (post tax) - year end IC 7.0 7.1 7.8 8.4 9.1 9.8 10.6

EV / IC (x) 1.4 1.3 1.7 1.6 1.6 1.5 1.4


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Nina Buechs +49 (0) 69 91 30 90 735 Laura Cooper +44 (0) 20 3207 7806 Sylvain Granjoux +33 (0) 1 5844 9509

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Charlotte Kilby +44 (0) 20 3207 7832

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Member FINRA & SIPC Andrew Holder +1 (617) 292 8222 Kelleigh Faldi +1 (617) 292 8288

Colin Andrade +1 (617) 292 8230 Kieran O'Sullivan +1 (617) 292 8292

Cathal Carroll +1 (646) 445 7206 Emily Mouret +1 (646) 445 7204

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Julie Doherty +1 (617) 292 8228


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Please note that the use of this research report is subject to the conditions and restrictions set forth in the “General investment-related disclosures” and the “Legal disclaimer” at the end of this document.

For analyst certification and remarks regarding foreign investors and country-specific disclosures, please refer to the respective paragraph at the end of this document.

Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG)

Company Disclosures Pernod Ricard SA 5 (1) Berenberg Bank or its affiliate(s) was Lead Manager or Co-Lead Manager over the previous 12 months of a

public offering of this company. (2) Berenberg Bank acts as Designated Sponsor for this company. (3) Over the previous 12 months, Berenberg Bank and/or its affiliate(s) has effected an agreement with this

company for investment banking services or received compensation or a promise to pay from this company for investment banking services.

(4) Berenberg Bank and/or its affiliate(s) holds 5% or more of the share capital of this company. (5) Berenberg Bank holds a trading position in shares of this company. (6) Berenberg Bank and/or its affiliate(s) holds a net short position of 1% or more of the share capital of this

company, calculated by methods required by German law as of the last trading day of the past month. Historical price target and rating changes for Pernod Ricard SA in the last 12 months (full coverage)

Date Price target - EUR Rating Initiation of coverage

20 April 12 95.00 Buy 28 September 10

13 March 13 120.00 Buy

Berenberg distribution of ratings and in proportion to investment banking services

Buy 44.85 % 66.67 % Sell 17.17 % 7.41 % Hold 37.98 % 25.93 %

Valuation basis/rating key

The recommendations for companies analysed by Berenberg Bank’s equity research department are either made on an absolute basis (“absolute rating system”) or relative to the sector (“relative rating system“), which is clearly stated in the financial analysis. For both absolute and relative rating system, the three-step rating key “Buy”, “Hold” and “Sell” is applied. For a detailed explanation of our rating system, please refer to our website at

http://www.berenberg.de/research.html?&L=1

NB: During periods of high market, sector or stock volatility, or in special situations, the rating system criteria as described on our website may be breached temporarily.

Competent supervisory authority

Bundesanstalt für Finanzdienstleistungsaufsicht -BaFin- (Federal Financial Supervisory Authority), Graurheindorfer Straße 108, 53117 Bonn and Lurgiallee 12, 60439 Frankfurt am Main

http://www.berenberg.de/research.html?&L=1


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General investment-related disclosures Joh. Berenberg, Gossler & Co. KG (“Berenberg Bank”) has made every effort to carefully research all information contained in this financial analysis. The information on which the financial analysis is based has been obtained from sources which we believe to be reliable such as, for example, Thomson Reuters, Bloomberg and the relevant specialised press as well as the company which is the subject of this financial analysis. Only that part of the research note is made available to the issuer (who is the subject of this analysis) which is necessary to properly reconcile with the facts. Should this result in considerable changes a reference is made in the research note.

Opinions expressed in this financial analysis are our current opinions as of the issuing date indicated on this document. The companies analysed by Berenberg Bank are divided into two groups: those under “full coverage” (regular updates provided); and those under “screening coverage” (updates provided as and when required at irregular intervals).

The functional job title of the person/s responsible for the recommendations contained in this report is “Equity Research Analyst” unless otherwise stated on the cover.

The following internet link provides further remarks on our financial analyses: http://www.berenberg.de/research.html?&L=1&no_cache=1

Legal disclaimer This document has been prepared by Berenberg Bank. This document does not claim completeness regarding all the information on the stocks, stock markets or developments referred to in it. On no account should the document be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgements.

The document has been produced for information purposes for institutional clients or market professionals. Private customers, into whose possession this document comes, should discuss possible investment decisions with their customer service officer as differing views and opinions may exist with regard to the stocks referred to in this document.

This document is not a solicitation or an offer to buy or sell the mentioned stock.

The document may include certain descriptions, statements, estimates, and conclusions underlining potential market and company development. These reflect assumptions, which may turn out to be incorrect. Berenberg Bank and/or its employees accept no liability whatsoever for any direct or consequential loss or damages of any kind arising out of the use of this document or any part of its content.

Berenberg Bank and/or its employees may hold, buy or sell positions in any securities mentioned in this document, derivatives thereon or related financial products. Berenberg Bank and/or its employees may underwrite issues for any securities mentioned in this document, derivatives thereon or related financial products or seek to perform capital market or underwriting services.

Analyst certification I, Philip Morrisey, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein.

In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by Berenberg Bank or its affiliates.

I, Josh Puddle, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein.

In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by Berenberg Bank or its affiliates.

http://www.berenberg.de/research.html?&L=1&no_cache=1


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Remarks regarding foreign investors The preparation of this document is subject to regulation by German law. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

United Kingdom This document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.

United States of America This document has been prepared exclusively by Berenberg Bank. Although Berenberg Capital Markets LLC, an affiliate of Berenberg Bank and registered US broker-dealer, distributes this document to certain customers, Berenberg Capital Markets LLC does not provide input into its contents, nor does this document constitute research of Berenberg Capital Markets LLC. In addition, this document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.

This document is classified as objective for the purposes of FINRA rules. Please contact Berenberg Capital Markets LLC (+1 617.292.8200), if you require additional information.

Third-party research disclosures

Company Disclosures Pernod Ricard SA no disclosures (1) Berenberg Capital Markets LLC owned 1% or more of the outstanding shares of any class of the subject

company by the end of the prior month.* (2) Over the previous 12 months, Berenberg Capital Markets LLC has managed or co-managed any public

offering for the subject company.* (3) Berenberg Capital Markets LLC is making a market in the subject securities at the time of the report. (4) Berenberg Capital Markets LLC received compensation for investment banking services in the past 12 months,

or expects to receive such compensation in the next 3 months.* (5) There is another potential conflict of interest of the analyst or Berenberg Capital Markets LLC, of which the

analyst knows or has reason to know at the time of publication of this research report.

* For disclosures regarding affiliates of Berenberg Capital Markets LLC please refer to the ‘Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG)’ section above.

Copyright Berenberg Bank reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without Berenberg Bank’s prior written consent.

© June 2012 Berenberg Bank

Documents

2013 Mar 13 — Pernod Ricard SA