Pernod Ricard SA

Beverages

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 FY1417 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.
Y/E 30.06., EUR m 2011 2012 8,215 2,286 2,114 1,146 9,363 4.36 4.53 5.18 1.58 61.4% 27.8% 25.7% 2.2% 9.6% 3.6 12.8 13.9 15.7 2013E 8,858 2,512 2,327 1,324 8,735 5.03 5.01 5.71 1.67 62.6% 28.4% 26.3% 1.7% 10.4% 4.2 14.7 15.8 19.9 2014E 2015E 2016E 2017E

Buy
Rating system Current price Absolute Price target

EUR 99.90

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 old % old % 8758 1.1 9293 1.7 Sales 2280 2.0 2464 3.3 EBIT 4.86 3.2 5.53 4.6 EPS Source: Berenberg Bank estimates 2015e old % 9958 2.3 2696 4.2 6.25 5.5

Share data

Shares outstanding (m) Enterprise value (EUR m) Daily trading volume

266 36,835 584,006 100.40 75.24 MSCI 3.4 % 2.3 % 10.4 % 2.5 85.3 % 7.7 % 13.4 %

Performance data
High 52 weeks (EUR) Low 52 weeks (EUR) Relative performance to SXXP 1 month 4.2 % 3 months 9.7 % 12 months 16.2 %

Key data
Price/book value Net gearing CAGR sales 2012-2017 CAGR EPS 2012-2017

Business activities: Sales 7,643 EBITDA 2,068 EBIT 1,909 Net profit 1,045 Y/E net debt (net cash) 9,038 EPS (reported) 3.98 EPS (recurring) 4.12 CPS 4.72 DPS 1.44 Gross margin 60.3% EBITDA margin 27.1% EBIT margin 25.0% Dividend yield 2.2% ROCE 8.7% EV/sales 3.8 EV/EBITDA 13.9 EV/EBIT 15.0 P/E 15.9 Source: Company data, Berenberg Bank 9,451 10,185 11,006 11,914 2,742 3,022 3,335 3,681 2,544 2,809 3,105 3,432 1,541 1,754 1,994 2,261 8,236 7,680 7,000 6,184 5.85 6.66 7.57 8.58 5.79 6.59 7.49 8.49 6.53 7.39 8.36 9.43 1.93 2.19 2.49 2.83 63.3% 64.0% 64.6% 65.1% 29.0% 29.7% 30.3% 30.9% 26.9% 27.6% 28.2% 28.8% 1.9% 2.2% 2.5% 2.8% 11.5% 12.4% 13.4% 14.5% 3.8 3.5 3.2 2.9 13.2 11.8 10.5 9.3 14.3 12.7 11.3 10.0 17.3 15.2 13.3 11.8
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 philip.morrisey@berenberg.com

Josh Puddle
Analyst +44 20 3207 7881 josh.puddle@berenberg.com

Pernod Ricard SA
Beverages

Pernod Ricard financial and valuation summary

Income statement (E m) Net sales EBITDA Depreciation EBITA Amortization of intangibles EBIT Net financial charges Profit before exceptionals Exceptionals Profit before tax Tax Tax rate (%) Tax rate before exceptionals (%) Associates Minorities / discontinued Net profit Net profit before exceptionals EPS (EUR) EPS before exceptionals (fd, EUR) CEPS before exceptionals (fd, EUR) Dividend per share (EUR) Average number of shares (fd, m) Cash flow (E m) EBIT Depreciation and amortization Working capital Other Operating cash flow Dividends (associates / minorities) Net interest Taxation Capital expenditure (net) Acquisition / sale fixed assets Pension deficit payments Free cash flow Dividends Acquisitions / disposals Cash flow before financing Shares issued Shares repurchased Other (including exchange) Net cash flow Opening net (debt) / cash Closing net (debt) / cash ROIC / ROE (%) Working capital Net tangible fixed assets Operating invested capital (E m) Goodwill / other intangibles Invested capital (E m) NOPAT (E m) ROIC (pre tax, average operating IC) ROIC (post tax, average IC) WACC ROIC / WACC (x) ROE Jun 12 8,215 2,286 (156) 2,130 (16) 2,114 (509) 1,605 (184) 1,421 (247) 17.4 23.5 (1) (27) 1,146 1,201 4.36 4.53 5.18 1.58 265.1 Jun 12 2,114 172 (55) (302) 1,929 (35) (516) (288) (271) 20 0 839 (376) (37) 426 0 (47) (704) (325) (9,038) (9,363) Jun 12 3,087 1,923 5,010 17,827 22,837 1,617 43.4 7.3 7.1 1.0 11.7 Jun 13E 8,858 2,512 (168) 2,344 (17) 2,327 (500) 1,827 (101) 1,726 (384) 22.2 26.0 0 (18) 1,324 1,334 5.03 5.01 5.71 1.67 266.2 Jun 13E 2,327 185 (242) (317) 1,954 (14) (500) (380) (340) 40 0 761 (434) 103 429 0 (50) 249 628 (9,363) (8,735) Jun 13E 3,329 1,351 4,679 17,338 22,017 1,722 48.0 7.7 7.1 1.1 12.2 Jun 14E 9,451 2,742 (179) 2,563 (18) 2,544 (435) 2,109 0 2,109 (548) 26.0 26.0 0 (20) 1,541 1,541 5.85 5.79 6.53 1.93 266.2 Jun 14E 2,544 198 (222) (332) 2,188 (15) (435) (439) (310) 10 0 999 (451) 0 548 0 (50) 0 498 (8,735) (8,236) Jun 14E 3,551 1,539 5,090 17,320 22,410 1,883 52.1 8.5 7.1 1.2 13.4 Jun 15E 10,185 3,022 (193) 2,829 (20) 2,809 (409) 2,400 0 2,400 (624) 26.0 26.0 0 (22) 1,754 1,754 6.66 6.59 7.39 2.19 266.2 Jun 15E 2,809 213 (276) (350) 2,396 (16) (409) (499) (334) 10 0 1,147 (541) 0 606 0 (50) 0 556 (8,236) (7,680) Jun 15E 3,827 1,769 5,596 17,300 22,896 2,079 52.6 9.2 7.1 1.3 13.8 Jun 16E 11,006 3,335 (209) 3,126 (21) 3,105 (378) 2,727 0 2,727 (709) 26.0 26.0 0 (24) 1,994 1,994 7.57 7.49 8.36 2.49 266.2 Jun 16E 3,105 230 (308) (371) 2,657 (18) (378) (567) (361) 10 0 1,342 (613) 0 730 0 (50) 0 680 (7,680) (7,000) Jun 16E 4,135 1,990 6,125 17,278 23,403 2,298 53.0 9.9 7.1 1.4 14.2 Jun 17E 11,914 3,681 (226) 3,455 (23) 3,432 (341) 3,091 0 3,091 (804) 26.0 26.0 0 (27) 2,261 2,261 8.58 8.49 9.43 2.83 266.2 Jun 17E 3,432 249 (341) (394) 2,946 (20) (341) (643) (391) 10 0 1,562 (696) 0 866 0 (50) 0 816 (7,000) (6,184) Jun 17E 4,476 2,200 6,676 17,255 23,931 2,539 53.6 10.7 7.1 1.5 14.5 Date 13-Mar-13 Enterprise value (E m) Market cap plus average net debt / (cash) plus pension deficit plus other liabilities plus minorities less associates / other assets Enterprise value Valuation (x) EV / Net sales EV / EBITDA EV / EBIT EV / Invested capital P / EPS before exceptionals (fd) P / CEPS before exceptionals (fd) P / Book value FCF yield (%) Dividend yield (%) Growth rates (%) Net sales EBITDA EBIT Profit before exceptionals Net profit before exceptionals EPS before exceptionals (fd) Dividend per share Average number of shares Financial ratios (%) EBITDA / net sales EBIT / net sales EBITDA interest cover (x) EBIT interest cover (x) Dividend cover (x) Capex / net sales Free cash flow / EBITDA FCF / net profit before exceptionals Working capital / net sales Net debt / EV (%) Net debt / EBITDA (x) Organic net sales growth (%) France Other Europe Americas Asia Pacific / Rest of World Organic net sales growth Divisional estimates (E m) Net sales Gross profit A&P Overheads EBIT France Rest Of Europe Americas Asia Pacific / Rest of World Jun 12 18,874 9,201 367 826 424 (364) 29,328 Dec 11 3.7 13.4 14.5 1.3 15.8 13.8 1.8 4.8 2.2 Jun 12 7.5 10.5 10.7 11.5 10.0 9.9 9.7 0.1 Jun 12 27.8 25.7 4.5 4.2 2.9 3.3 37 70 38 32 4.1 Jun 12 (0.5) 2.5 5.9 15.2 7.6 Jun 12 8,215 (3,168) (1,571) (1,362) 2,114 181 470 582 880 Price 99.90 Target 120.0 ETR (%) 21.7 Jun 15E 26,597 7,958 367 826 360 (364) 35,744 Rec. BUY Jun 16E 26,597 7,340 367 826 360 (364) 35,126 EPS 5YE 13.4% Jun 17E 26,597 6,592 367 826 360 (364) 34,378

Jun 13E Jun 14E 26,597 9,049 367 826 360 (364) 36,835 26,597 8,485 367 826 360 (364) 36,271

Dec 12E Dec 13E Dec 14E 3.9 13.7 14.9 1.5 17.8 15.6 2.1 3.7 1.9 4.0 13.9 15.0 1.6 18.6 16.4 2.3 3.3 1.8 3.7 12.5 13.5 1.6 16.2 14.4 2.1 4.0 2.1 Jun 15E 7.8 10.2 10.4 13.8 13.8 13.8 13.8 0.0 Jun 15E 29.7 27.6 7.4 6.9 3.0 3.3 38 65 38 21 2.5 Jun 15E 1.5 3.0 6.8 12.0 7.8 Jun 15E 10,185 (3,671) (2,005) (1,701) 2,809 158 491 722 1,437

Dec 15E Dec 16E 3.4 11.2 12.0 1.5 14.3 12.7 1.9 4.7 2.3 Jun 16E 8.1 10.4 10.5 13.6 13.7 13.7 13.7 0.0 Jun 16E 30.3 28.2 8.8 8.2 3.0 3.3 40 67 38 20 2.1 Jun 16E 3.0 4.0 7.2 11.3 8.1 Jun 16E 11,006 (3,901) (2,179) (1,821) 3,105 163 521 783 1,638 3.0 9.9 10.7 1.5 12.6 11.3 1.7 5.5 2.7 Jun 17E 8.3 10.4 10.5 13.3 13.4 13.4 13.4 0.0 Jun 17E 30.9 28.8 10.8 10.1 3.0 3.3 42 69 38 18 1.7 Jun 17E 3.0 4.8 7.3 11.1 8.3 Jun 17E 11,914 (4,159) (2,370) (1,953) 3,432 167 558 849 1,857

Jun 13E Jun 14E 7.8 9.9 10.1 13.8 11.1 10.6 5.6 0.2 6.7 9.2 9.3 15.4 15.5 15.5 15.5 0.0

Jun 13E Jun 14E 28.4 26.3 5.0 4.7 3.0 3.8 30 57 38 24 3.5 29.0 26.9 6.3 5.8 3.0 3.3 36 65 38 23 3.0

Jun 13E Jun 14E (7.8) 0.5 7.0 12.1 5.9 0.0 1.9 6.4 11.8 7.0

Jun 13E Jun 14E 8,858 (3,315) (1,712) (1,505) 2,327 156 460 636 1,075 9,451 (3,468) (1,845) (1,593) 2,544 156 470 672 1,247

Source: Company reports, Berenberg Bank estimates

Pernod Ricard SA
Beverages

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
130

Figure 2: Pernod Ricard Consensus EPS, 2003-15E

7.0

FY15E
Consensus EPS (EUR per Share)

FY15E
FY12 FY11 FY14E FY13E

Consensus EPS (GBp per Share)

6.5
6.0 5.5 5.0 4.5 4.0 3.5

115
100

FY13E

FY14E

FY10
FY09 FY08

FY12
85

FY11
FY09 FY10

FY09-14E CAGR 12.4%

FY12-15E CAGR 12.3%

70
55

FY08 FY04 FY05 FY06 FY07 FY03

FY04-09 CAGR 5.6% Sep-02 Jun-04 Feb-06 Nov-07 Jul-09 Apr-11

FY07

FY 2009 Inflection

3.0 2.5 FY03

FY05
FY06

FY07-12 CAGR 4.8%

FY04
Nov-02 Sep-04 Jul-06 May-08 Mar-10

FY 2012 Inflection

40 Jan-01

Dec-12

Sep-14

2.0 Jan-01

Jan-12

Oct-13

Sep-15

Source: Datastream

Source: Datastream

Figure 3: Diageo Actual Share Price, 2001-2013

2200

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

100

1800
Share Price

Absolute share price (in GBp)

Share Price (Euro)

80

Absolute share price (in EUR)

1400

60

1000

40

600

Performance Relative to European Consumer Staples (Rebased Jan 2001)

Jul-02 Jan-04 Jul-05 Jan-07 Aug-08 Feb-10 Aug-11 Mar-13

20

Performance Relative to European Consumer Staples (Rebased Jan 2001)

Jul-02 Jan-04 Jul-05 Jan-07 Aug-08 Feb-10 Aug-11 Mar-13

200 Jan-01

0 Jan-01

Source: Datastream

Source: Datastream

Figure 5: Diageo YR 1 Fwd P/E, 2001-13E

28

Figure 6: Pernod Ricard YR 1 Fwd P/E, 200113E

30

24
P/E Multiple

European Consumer Staples

P/E Multiple

European Consumer Staples

25

20

20

16

15

12

10

Diageo
8 Jan-01 Jul-02 Jan-04 Jul-05 Jan-07 Aug-08 Feb-10 Aug-11 Mar-13 5 Jan-01 Jul-02

Pernod Ricard
Jan-04 Jul-05 Jan-07 Aug-08 Feb-10 Aug-11 Mar-13

Source: Datastream

Source: Datastream

Pernod Ricard SA
Beverages

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 Pernods 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 Pernods organic EBIT performance during the 2008-09 crisis was very similar to that of Diageo, but Pernods 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 Pernods 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.

Pernod Ricard SA
Beverages

Growth driver top line

In a previous report, Pernod Ricard: Its not all over yet for leverage, dated 23 April 2012, we discussed the outlook for Pernods 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 (%)
25 20 15 22 17 17 14 9

10
5 0 FY08

FY09

FY10

FY11

FY12

1H13

Emerging market organic net sales growth (%)

Source: Company reports

Pernod Ricard SA
Beverages

Figure 8: US Pernod brands by price point, 52 week growth and size, 2012
450 400 350

Glenlivet Martell Chivas Regal Beefeater Kahlua Ballantine's Absolut Malibu

Bubble size represents retail sales

Price per case ($)

300

250
200

Jameson

150
100 50 0 -25 -20

Presidente
Hiram Walker Kahlua cocktails
-15 -10

Seagram's gin
-5 0

Fris
5

Malibu cocktails
10 15 20 25 30

52 week growth (%)

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 (%)
Year end June (%) Central & Eastern Europe Latin America China India Other Asia Pacific / Rest of World Group organic net sales growth (%) 2010 (5.1) 16.6 14.0 28.0 3.2 1.8 2011 9.0 9.6 23.0 33.0 14.5 6.5 2012 16.0 7.5 24.0 27.0 9.5 7.6 2013E 12.0 5.5 19.0 16.5 9.4 5.9 2014E 12.0 7.0 16.0 16.0 10.0 7.0 2015E 11.0 8.0 16.0 16.0 10.0 7.8 2016E 10.0 10.0 15.0 15.0 9.0 8.1 2017E 10.0 10.0 15.0 15.0 8.0 8.3

Source: Company reports, Berenberg Bank estimates

Growth driver margins

One of the key elements of Pernods 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.

Pernod Ricard SA
Beverages

Figure 10: Pernod Ricards top 14 spirits brands organic net sales growth versus retail price per case, fiscal 2007-12 (%)
1600
1400
Retail value per case (US$)

Royal Salute

R = 0.43

1200
1000 800 600 400 200 0 (2) 0 2 Kahlua Chivas Regal Ballantine's The Glenlivet Havana Club 8 10 12 14 16 Jameson Martell

Ricard Malibu
4

Absolut Beefeater 6

18

20

22

Net sales CAGR, 2007 - 12 (%)

Source: Company reports, Berenberg Bank estimates

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 4060 bps). Figure 11: Pernod Ricard - estimated organic EBIT margin expansion, FY06-17E (bps)
Historic Year end June Gross margin A&P Gross margin after A&P Overheads / other EBIT margin (%) Gross margin A&P Gross margin after A&P Overheads / other EBIT margin growth (bps) 2006 55.5 (17.1) 38.4 (17.7) 20.7 73 (83) (10) na 50 2007 55.7 (17.1) 38.6 (16.1) 22.5 59 (19) 40 170 210 2008 57.2 (17.9) 39.3 (16.2) 23.1 128 (61) 67 32 99 2009 58.4 (17.2) 41.2 (15.6) 25.6 (18) 115 96 (6) 90 2010 59.6 (17.8) 41.7 (16.4) 25.3 123 (57) 66 (17) 49 2011 60.3 (18.9) 41.5 (16.5) 25.0 87 (71) 16 13 29 2012 61.4 (19.1) 42.3 (16.6) 25.7 31 2 33 2 35 2013E 62.6 (19.3) 43.3 (17.0) 26.3 81 (11) 71 (40) 31 2014E 63.3 (19.5) 43.8 (16.9) 26.9 69 (18) 50 15 65 Estimates 2015E 64.0 (19.7) 44.3 (16.7) 27.6 66 (16) 50 15 66 2016E 64.6 (19.8) 44.8 (16.5) 28.2 59 (11) 48 16 64 2017E 65.1 (19.9) 45.2 (16.4) 28.8 54 (10) 44 15 59

Source: Company reports, Berenberg Bank estimates

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.

Pernod Ricard SA
Beverages

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)
6 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E

5.4 4.5 4.1

5.4 4.4 4.1

3.6

3.5
3.0

2.6

2.5

2.1

1.7

Source: Company reports, Berenberg Bank estimates

Figure 13: Comparison of adjusted operating free cash flow at Diageo and Pernod Ricard, fiscal 2005-12 (% EBITDA)
110 100 90 80 70 60

50
40 2005 2006 2007 2008 2009 2010 2011 2012

Pernod Ricard (adj. opr. FCF % EBITDA)

Diageo (adj. opr. FCF % EBITDA)

Source: Company reports, Berenberg Bank estimates

Figure 14: Comparison of adjusted free cash flow at Diageo and Pernod Ricard, fiscal 2005-12 (% EBITDA)
80
70 60 50 40 30 20

10
0 2005 2006 2007 2008 2009 2010 2011 2012

Pernod Ricard (adj FCF % EBITDA)

Diageo (adjusted FCF % EBITDA)

Source: Company reports, Berenberg Bank estimates

Pernod Ricard SA
Beverages

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
400 Moet Hennessy 350

300

Remy Cointreau

Average price per EQ

Bubble size represents dollar sales value

250

200

Pernod Ricard

Brown-Forman Bacardi

150

Beam Diageo Campari Heaven Hill

100

Constellation Brands

Private label

Sazerac 50 -4 -2 0 2 4 6 8 10 12 14

12 month retail sales growth, %

Source: The Nielsen Company

Pernod Ricard SA
Beverages

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 ()
Year end June Berenberg estimate () % growth Consensus estimate () % difference Berenberg prior estimate () % revision 2012 4.53 9.9 4.53 0.0 4.53 0.0 2013E 5.01 10.6 4.97 0.8 4.86 3.2 2014E 5.79 15.5 5.63 2.8 5.53 4.6 2015E 6.59 13.8 6.41 2.7 6.25 5.5 2016E 7.49 13.7 7.22 3.7 7.11 5.3 2017E 8.49 13.4 8.31 2.2 8.10 4.8 12.4% 13.4% CAGR 12-16E

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
Per share in Euros DCF value (WACC 7.1%, terminal sales growth 3.0%) PE value (50% premium to Dec 11 market PE of 11.3x) Average Source: Berenberg Bank estimates 135.0 104.9 120.0

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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. Absoluts 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: Pernods 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. Martells 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 Jacobs 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

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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 industrys largest segment. Pernod was sub-scale in the US, the spirits industrys 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 Avin 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: Pernods 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 Pernods 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 Pernods 3.8x leverage to continue to decline, subject to the timing of any bolt-on deals. The Ricard family: The familys 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 France Other Europe Americas Asia Pacific / Rest of World Net sales France Other Europe Americas Asia Pacific / Rest of World EBIT France Other Europe Americas Asia Pacific / Rest of World EBIT margin (%) France Western Europe Central & Eastern Europe Other Europe North America Latin America Americas Australia / New Zealand China India South Korea Other Asia Pacific / Rest of World Asia Pacific / Rest of World Organic net sales growth (%) France Other Europe Americas Asia Pacific / Rest of World Organic EBIT margin growth (basis points) France Other Europe Americas Asia Pacific / Rest of World Organic EBIT growth (%)
Source: Company reports, Berenberg Bank estimates

2012 746 2,137 2,167 3,165 8,215 181 470 582 880 2,114 24.3 22.0 26.9 27.8 25.7 (0.5) (1.0) 16.0 2.5 na na 5.9 na 24.0 na (2.0) na 15.2 7.6 (67) 24 (58) 122 35 (3.2) 3.5 3.6 20.8 9.1

2013E 688 2,154 2,358 3,659 8,858 156 460 636 1,075 2,327 22.7 21.4 27.0 29.4 26.3 (7.8) (3.4) 12.0 0.5 7.9 5.5 7.0 1.5 19.0 16.5 1.3 9.4 12.1 5.9 (70) (55) (25) 110 31 (10.5) (2.1) 6.0 16.5 7.2

2014E 688 2,177 2,496 4,089 9,451 156 470 672 1,247 2,544 22.7 21.6 26.9 30.5 26.9 0.0 (2.0) 12.0 1.9 6.0 7.0 6.4 3.0 16.0 16.0 2.0 10.0 11.8 7.0 0 20 (0) 110 65 0.0 2.9 6.4 16.0 9.7

2015E 698 2,243 2,665 4,580 10,185 158 491 722 1,437 2,809 22.7 21.9 27.1 31.4 27.6 1.5 (0.5) 11.0 3.0 6.0 8.0 6.8 3.0 16.0 16.0 2.0 10.0 12.0 7.8 (0) 30 20 90 66 1.5 4.5 7.5 15.3 10.4

2016E 719 2,332 2,857 5,097 11,006 163 521 783 1,638 3,105 22.7 22.3 27.4 32.1 28.2 3.0 1.0 10.0 4.0 5.5 10.0 7.2 3.0 15.0 15.0 2.0 9.0 11.3 8.1 (0) 45 30 75 64 3.0 6.1 8.4 14.0 10.5

2017E 741 2,444 3,065 5,664 11,914 167 558 849 1,857 3,432 22.6 22.8 27.7 32.8 28.8 3.0 2.0 10.0 4.8 5.5 10.0 7.3 3.0 15.0 15.0 2.0 8.0 11.1 8.3 (10) 50 30 65 59 2.5 7.1 8.4 13.4 10.5

750 2,114 2,068 2,711 7,643 189 479 558 684 1,909 25.2 22.7 27.0 25.2 25.0 4.2 (2.0) 9.0 0.2 2.0 9.6 4.6 (3.0) 23.0 33.0 3.0 14.5 14.8 6.5 (64) 45 (48) 88 29 1.6 2.2 2.8 18.9 7.7

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

2011 EBITDA margin on net sales EBIT margin on net sales Depreciation as % of net sales EBITDA interest cover (x) EBIT interest cover (x) Dividend payout ratio (%) Dividend cover (x) ROIC (pre tax) ROIC (post tax) ROE Operating cash flow to EBITDA (%) Free cashflow to EBITDA (%) FCF to net profit before except. / goodwill (%) Capex to sales (%) Capex to depreciation (x) Working capital % of net sales Book value per share Net debt / EBITDA (x) Net debt / group funds (%) Net debt / EV (%)
Source: Company reports, Berenberg Bank estimates

2012 27.8 25.7 1.9 4.5 4.2 35 2.9 9.6 7.3 11.7 84 37 70 3.3 1.6 37.6 42 4.1 85 32

2013E 28.4 26.3 1.9 5.0 4.7 33 3.0 10.4 7.7 12.2 78 30 57 3.8 1.8 37.6 42 3.5 80 24

2014E 29.0 26.9 1.9 6.3 5.8 33 3.0 11.5 8.5 13.4 80 36 65 3.3 1.6 37.6 46 3.0 68 23

2015E 29.7 27.6 1.9 7.4 6.9 33 3.0 12.4 9.2 13.8 79 38 65 3.3 1.6 37.6 51 2.5 58 21

2016E 30.3 28.2 1.9 8.8 8.2 33 3.0 13.4 9.9 14.2 80 40 67 3.3 1.6 37.6 56 2.1 47 20

2017E 30.9 28.8 1.9 10.8 10.1 33 3.0 14.5 10.7 14.5 80 42 69 3.3 1.6 37.6 62 1.7 38 18

27.1 25.0 1.8 4.4 4.1 35 2.9 8.7 6.7 11.6 90 43 81 2.9 1.4 38.3 36 4.4 95 31

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

Net sales EBITDA Depreciation EBITA Amortization of intangibles EBIT Net financial charges Profit before exceptionals Exceptionals Profit before tax Tax on profit before exceptionals Tax on exceptionals Tax Tax rate before exceptionals (%) Tax rate (%) Associates / discontinued / other Minorities Net profit Net profit before exceptionals Dividends Retained earnings EPS EPS before exceptionals EPS (fd) EPS before exceptionals (fd) CEPS before exceptionals (fd) Dividend per share Average number of shares (m) Average number of shares (fd, m) Source: Company reports, Berenberg Bank estimates 2011 7,643 2,068 (141) 1,928 (18) 1,909 (469) 1,440 (45) 1,395 (317) (2) (319) 22.0 22.9 1 (32) 1,045 1,092 (368) 677 3.98 4.16 3.94 4.12 4.72 1.44 262.7 265.0 2012 8,215 2,286 (156) 2,130 (16) 2,114 (509) 1,605 (184) 1,421 (377) 130 (247) 23.5 17.4 (1) (27) 1,146 1,201 (392) 754 4.36 4.57 4.32 4.53 5.18 1.58 262.9 265.1 2013E 8,858 2,512 (168) 2,344 (17) 2,327 (500) 1,827 (101) 1,726 (475) 91 (384) 26.0 22.2 0 (18) 1,324 1,334 (434) 890 5.03 5.06 4.97 5.01 5.71 1.67 263.5 266.2 2014E 9,451 2,742 (179) 2,563 (18) 2,544 (435) 2,109 0 2,109 (548) 0 (548) 26.0 26.0 0 (20) 1,541 1,541 (451) 1,090 5.85 5.85 5.79 5.79 6.53 1.93 263.5 266.2 2015E 10,185 3,022 (193) 2,829 (20) 2,809 (409) 2,400 0 2,400 (624) 0 (624) 26.0 26.0 0 (22) 1,754 1,754 (541) 1,213 6.66 6.66 6.59 6.59 7.39 2.19 263.5 266.2 2016E 11,006 3,335 (209) 3,126 (21) 3,105 (378) 2,727 0 2,727 (709) 0 (709) 26.0 26.0 0 (24) 1,994 1,994 (613) 1,381 7.57 7.57 7.49 7.49 8.36 2.49 263.5 266.2 2017E 11,914 3,681 (226) 3,455 (23) 3,432 (341) 3,091 0 3,091 (804) 0 (804) 26.0 26.0 0 (27) 2,261 2,261 (696) 1,565 8.58 8.58 8.49 8.49 9.43 2.83 263.5 266.2

Figure 21: Pernod Ricard key financial growth rates, FY 2011-17E (%)
2011 Net sales EBITDA EBITA EBIT Profit before exceptionals Net profit Net profit before exceptionals / goodwill EPS EPS before exceptionals / goodwill EPS (fd) EPS before exceptionals / goodwill (fd) CEPS (fd) Dividend per share Average number of shares (m) Source: Company reports, Berenberg Bank estimates 7.9 5.8 6.0 6.4 10.9 9.9 9.1 9.9 9.1 9.8 9.0 8.3 7.5 (0.0) 2012 7.5 10.5 10.5 10.7 11.5 9.7 10.0 9.6 9.9 9.6 9.9 9.6 9.7 0.1 2013E 7.8 9.9 10.1 10.1 13.8 15.5 11.1 15.3 10.9 15.1 10.6 10.2 5.6 0.2 2014E 6.7 9.2 9.3 9.3 15.4 16.4 15.5 16.4 15.5 16.4 15.5 14.4 15.5 0.0 2015E 7.8 10.2 10.4 10.4 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.1 13.8 0.0 2016E 8.1 10.4 10.5 10.5 13.6 13.7 13.7 13.7 13.7 13.7 13.7 13.1 13.7 0.0 2017E 8.3 10.4 10.5 10.5 13.3 13.4 13.4 13.4 13.4 13.4 13.4 12.8 13.4 0.0

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

2011 EBIT Depreciation and amortization Working capital Other items Operating cash flow Dividends from associates Dividends paid to minorities Net interest Taxation Capital expenditure Sale of tangible fixed assets Pension deficit payments Free cash flow Dividends Acquisitions / disposals Cash flow before financing Shares issued Acquisition / disposal of treasury shares Exchange impact Other items Net cash flow Opening net (debt) / cash Closing net (debt) / cash
Source: Company reports, Berenberg Bank estimates

2012 2,114 172 (55) (302) 1,929 0 (35) (516) (288) (271) 20 839 (376) (37) 426 0 (47) (710) 6 (325)

2013E 2,327 185 (242) (317) 1,954 0 (14) (500) (380) (340) 40 761 (434) 103 429 0 (50) 249 0 628 (9,363) (8,735)

2014E 2,544 198 (222) (332) 2,188 0 (15) (435) (439) (310) 10 999 (451) 0 548 0 (50) 0 0 498 (8,735) (8,236)

2015E 2,809 213 (276) (350) 2,396 0 (16) (409) (499) (334) 10 1,147 (541) 0 606 0 (50) 0 0 556 (8,236) (7,680)

2016E 3,105 230 (308) (371) 2,657 0 (18) (378) (567) (361) 10 1,342 (613) 0 730 0 (50) 0 0 680 (7,680) (7,000)

2017E 3,432 249 (341) (394) 2,946 0 (20) (341) (643) (391) 10 1,562 (696) 0 866 0 (50) 0 0 816 (7,000) (6,184)

1,909 159 32 (232) 1,868 0 (38) (478) (256) (223) 11 884 (351) 152 685 0 (70) 932 (1) 1,546

(10,584) (9,038) (9,038) (9,363)

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

2011 Cash and marketable securities Accounts receivable Inventory Total other current assets Current assets Net tangible fixed assets Investments Other financial assets Total financial assets Goodwill Other intangible assets Other non - current assets Total assets Accounts payable Short - term debt Total other current liabilities Current liabilities Long - term debt Net deferred tax liability Other non - current liabilities Total provisions Total liabilities Minority interest Common equity Liabilities and shareholders funds
Source: Company reports, Berenberg Bank estimates

2012 787 1,318 4,295 121 6,521 1,923 18 294 8,756 5,126 12,234 193 26,309 2,130 880 519 3,529 9,270 1,161 191 1,186 15,337 169 10,803 26,309

2013E 787 1,421 4,631 130 6,970 1,351 18 294 8,633 5,010 11,861 193 25,697 2,297 880 560 3,736 8,642 1,161 191 994 14,724 174 10,799 25,697

2014E 787 1,516 4,941 139 7,384 1,539 18 294 9,235 5,010 11,843 193 26,280 2,450 880 597 3,927 8,143 1,161 191 785 14,208 178 11,894 26,280

2015E 787 1,634 5,325 150 7,896 1,769 18 294 9,978 5,010 11,823 193 27,003 2,641 880 643 4,164 7,587 1,161 191 554 13,658 184 13,162 27,003

2016E 787 1,766 5,754 162 8,469 1,990 18 294 10,770 5,010 11,801 193 27,775 2,854 880 695 4,429 6,907 1,161 191 298 12,987 190 14,598 27,775

2017E 787 1,911 6,229 175 9,103 2,200 18 294 11,614 5,010 11,778 193 28,595 3,089 880 753 4,722 6,091 1,161 191 16 12,181 196 16,218 28,595

774 1,262 3,875 155 6,066 1,805 6 178 8,055 4,746 11,291 117 24,209 1,884 405 398 2,687 9,407 1,198 201 1,220 14,713 190 9,306 24,209

Figure 24: Pernod Ricard return on capital estimates, FY 2011-17E (m)

2011 Working capital Net tangible fixed assets Operating invested capital Intangible assets Goodwill / brands amortized Invested capital EBIT Tax NOPAT Average operating invested capital Average invested capital ROIC (operating) ROIC (pre tax) ROIC (post tax) ROIC (post tax) - year end IC EV / IC (x)
Source: Company reports, Berenberg Bank estimates

2012 3,087 1,923 5,010 17,360 467 22,837 2,114 (497) 1,617 4,871 22,045 43.4 9.6 7.3 7.1 1.3

2013E 3,329 1,351 4,679 16,871 467 22,017 2,327 (605) 1,722 4,845 22,427 48.0 10.4 7.7 7.8 1.7

2014E 3,551 1,539 5,090 16,853 467 22,410 2,544 (662) 1,883 4,885 22,214 52.1 11.5 8.5 8.4 1.6

2015E 3,827 1,769 5,596 16,833 467 22,896 2,809 (730) 2,079 5,343 22,653 52.6 12.4 9.2 9.1 1.6

2016E 4,135 1,990 6,125 16,811 467 23,403 3,105 (807) 2,298 5,860 23,149 53.0 13.4 9.9 9.8 1.5

2017E 4,476 2,200 6,676 16,788 467 23,931 3,432 (892) 2,539 6,400 23,667 53.6 14.5 10.7 10.6 1.4

2,926 1,805 4,731 16,037 485 21,253 1,909 (420) 1,489 4,689 22,069 40.7 8.7 6.7 7.0 1.4

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Contacts: Investment Banking

Equity Research
BANKS Nick Anderson James Chappell Andrew Lowe Eleni Papoula BEVERAGES Philip Morrisey Josh Puddle BUSINESS SERVICES William Foggon Simon Mezzanotte Arash Roshan Zamir Konrad Zomer CAPITAL GOODS Frederik Bitter Benjamin Glaeser William Mackie Margaret Paxton Alexander Virgo Felix Wienen CHEMICALS Jade Barkett Asad Farid John Philipp Klein Jaideep Pandya CONSTRUCTION Chris Moore Robert Muir Michael Watts DIVERSIFIED FINANCIALS Pras Jeyanandhan Richard Perrott +44 (0) 20 3207 7838 +44 (0) 20 3207 7844 +44 (0) 20 3465 2743 +44 (0) 20 3465 2741 ECONOMICS Dr. Holger Schmieding Dr. Christian Schulz Robert Wood FOOD MANUFACTURING Fintan Ryan James Targett +44 (0) 20 3207 7889 +44 (0) 20 3207 7878 +44 (0) 20 3207 7822 E-mail: firstname.lastname@berenberg.com; Internet www.berenberg.de MID-CAP GENERAL Gunnar Cohrs Bjoern Lippe Anna Patrice Alexandra Schlegel Stanislaus von Thurn und Taxis REAL ESTATE Kai Klose Estelle Weingrod TECHNOLOGY Adnaan Ahmad Sebastian Grabert Daud Khan Ali Khwaja Tammy Qiu TELECOMMUNICATIONS Wassil El Hebil Usman Ghazi Stuart Gordon Laura Janssens Paul Marsch Barry Zeitoune TOBACCO Erik Bloomquist Kate Kalashnikova UTILITIES Robert Chantry Andrew Fisher Oliver Salvesen Lawson Steele +44 (0) 20 3207 7894 +44 (0) 20 3207 7845 +44 (0) 20 3207 7863 +44 (0) 20 3207 7896 +44 (0) 20 3207 2631

+44 (0) 20 3207 7892 +44 (0) 20 3207 7881

+44 (0) 20 3465 2748 +44 (0) 20 3207 7873

+44 (0) 20 3207 7882 +44 (0) 20 3207 7917 +44 (0) 20 3465 2636 +44 (0) 20 3207 7920

GENERAL RETAIL & LUXURY GOODS Bassel Choughari +44 (0) 20 3465 2675 John Guy +44 (0) 20 3465 2674 HEALTHCARE Scott Bardo Alistair Campbell Charles Cooper Louise Hinds Adrian Howd Tom Jones

+44 (0) 20 3207 7888 +44 (0) 20 3207 7931

+44 (0) 20 3207 7916 +44 (0) 20 3207 7918 +44 (0) 20 3207 7837 +44 (0) 20 3207 7934 +44 (0) 20 3207 7856 +44 (0) 20 3207 7915

+44 (0) 20 3207 7869 +44 (0) 20 3207 7876 +44 (0) 20 3465 2637 +44 (0) 20 3465 2747 +44 (0) 20 3207 7874 +44 (0) 20 3207 7877

+44 (0) 20 3207 7851 +44 (0) 20 3207 7834 +44 (0) 20 3465 2638 +44 (0) 20 3207 7852 +44 (0) 20 3465 2673

HOUSEHOLD & PERSONAL CARE Seth Peterson +44 (0) 20 3207 7891 Andrew Steele +44 (0) 20 3207 7926 INSURANCE Tom Carstairs Peter Eliot Kai Mueller Matthew Preston Sami Taipalus MEDIA Robert Berg Emma Coulby Laura Janssens Sarah Simon

+44 (0) 20 3207 7862 +44 (0) 20 3207 7824 +44 (0) 20 3207 7858 +44 (0) 20 3465 2639 +44 (0) 20 3207 7857 +44 (0) 20 3207 7859

+44 (0) 20 3207 7937 +44 (0) 20 3207 7932 +44 (0) 20 3207 7930 +44 (0) 20 3207 7890

+44 (0) 20 3207 7823 +44 (0) 20 3207 7880 +44 (0) 20 3465 2681 +44 (0) 20 3207 7913 +44 (0) 20 3207 7866

+44 (0) 20 3207 7870 +44 (0) 20 3465 2665

+44 (0) 20 3465 2737 +44 (0) 20 3207 7860 +44 (0) 20 3207 7928

+44 (0) 20 3207 7899 +44 (0) 20 3207 7925

+44 (0) 20 3465 2680 +44 (0) 20 3207 7821 +44 (0) 20 3465 2639 +44 (0) 20 3207 7830

+44 (0) 20 3207 7861 +44 (0) 20 3207 7937 +44 (0) 20 3207 7818 +44 (0) 20 3207 7887

Sales
Specialist Sales CONSUMER Rupert Trotter INSURANCE Trevor Moss LONDON Miel Bakker John von Berenberg-Consbruch Ronald Bernette Matt Chawner Toby Flaux Sean Heath David Hogg Ben Hutton James Matthews David Mortlock Peter Nichols George Smibert Max von Doetinchem Paul Walker E-mail: firstname.lastname@berenberg.com; Internet www.berenberg.de +44 (0) 20 3207 7815 HEALTHCARE Frazer Hall TECHNOLOGY Jean Beaubois HAMBURG Susette Mantzel Marco Weiss PARIS Christophe Choquart Dalila Farigoule Clmence La Clavire-Peyraud Olivier Thibert ZURICH Stephan Hofer Carsten Kinder Gianni Lavigna Benjamin Stillfried CRM FRANKFURT Michael Brauburger Nina Buechs Andr Grosskurth Boris Koegel Joachim Kopp +49 (0) 69 91 30 90 741 +49 (0) 69 91 30 90 735 +49 (0) 69 91 30 90 734 +49 (0) 69 91 30 90 740 +49 (0) 69 91 30 90 742 LONDON Greg Swallow Laura Cooper CORPORATE ACCESS LONDON Patricia Nehring +44 (0) 20 3207 7833 +44 (0) 20 3207 7806 +44 (0) 20 3207 7875 UTILITIES Benita Barretto INDUSTRIALS Chris Armstrong Kaj Alftan Sales Trading HAMBURG Paul Dontenwill Christian Endras Gregor Labahn Chris McKeand Fin Schaffer Lars Schwartau Marvin Schweden Tim Storm Philipp Wiechmann LONDON Stewart Cook Simon Messman Stephen O'Donohoe PARIS Sylvain Granjoux EVENTS LONDON Natalie Meech Charlotte Kilby Charlotte Reeves Hannah Whitehead +44 (0) 20 3207 7829

+44 (0) 20 3207 7893

+44 (0) 20 3207 7835

+44 (0) 20 3207 7809 +44 (0) 20 3207 7879

+44 (0) 20 3207 7808 +44 (0) 20 3207 7805 +44 (0) 20 3207 7828 +44 (0) 20 3207 7847 +44 (0) 20 3465 2745 +44 (0) 20 3465 2742 +44 (0) 20 3465 2628 +44 (0) 20 3207 7804 +44 (0) 20 3207 7807 +44 (0) 20 3207 7850 +44 (0) 20 3207 7810 +44 (0) 20 3207 7911 +44 (0) 20 3207 7826 +44 (0) 20 3465 2632

+49 (0) 40 350 60 694 +49 (0) 40 350 60 719

+33 (0) 1 5844 9508 +33 (0) 1 5844 9510 +33 (0) 1 5844 9521 +33 (0) 1 5844 9512

+49 (0) 40 350 60 563 +49 (0) 40 350 60 359 +49 (0) 40 350 60 571 +49 (0) 40 350 60 798 +49 (0) 40 350 60 596 +49 (0) 40 350 60 450 +49 (0) 40 350 60 576 +49 (0) 40 350 60 415 +49 (0) 40 350 60 346

+41 (0) 44 283 2029 +41 (0) 44 283 2024 +41 (0) 44 283 2038 +41 (0) 44 283 2033

+44 (0) 20 3465 2752 +44 (0) 20 3465 2754 +44 (0) 20 3465 2753

+33 (0) 1 5844 9509

+44 (0) 20 3207 7811

+44 (0) 20 3207 7831 +44 (0) 20 3207 7832 +44 (0) 20 3465 2671 +44 (0) 20 3207 7922

US Sales
BERENBERG CAPITAL MARKETS LLC Member FINRA & SIPC Andrew Holder Colin Andrade Cathal Carroll Burr Clark Julie Doherty +1 (617) 292 8222 +1 (617) 292 8230 +1 (646) 445 7206 +1 (617) 292 8282 +1 (617) 292 8228

E-mail: firstname.lastname@berenberg-us.com Kelleigh Faldi Kieran O'Sullivan Emily Mouret Jonathan Saxon +1 (617) 292 8288 +1 (617) 292 8292 +1 (646) 445 7204 +1 (646) 445 7202

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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 Pernod Ricard SA (1) (2) (3) (4) (5) (6) Disclosures 5

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. Berenberg Bank acts as Designated Sponsor for this company. 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. Berenberg Bank and/or its affiliate(s) holds 5% or more of the share capital of this company. Berenberg Bank holds a trading position in shares of this company. 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 20 April 12 13 March 13 Price target - EUR 95.00 120.00 Rating Buy Buy Initiation of coverage 28 September 10

Berenberg distribution of ratings and in proportion to investment banking services Buy Sell Hold 44.85 % 17.17 % 37.98 % 66.67 % 7.41 % 25.93 %

Valuation basis/rating key

The recommendations for companies analysed by Berenberg Banks 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 fr Finanzdienstleistungsaufsicht -BaFin- (Federal Financial Supervisory Authority), Graurheindorfer Strae 108, 53117 Bonn and Lurgiallee 12, 60439 Frankfurt am Main

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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.

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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

Pernod Ricard SA (1) (2) (3) (4) (5)

Disclosures
no disclosures

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.* Over the previous 12 months, Berenberg Capital Markets LLC has managed or co-managed any public offering for the subject company.* Berenberg Capital Markets LLC is making a market in the subject securities at the time of the report. 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.* 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 Banks prior written consent. June 2012 Berenberg Bank

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