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Pernod Ricard eyes margin improvement in EMEA-LATAM business

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PARIS (Reuters) – Drinks group Pernod Ricard, which is being targeted by activist investor Elliott, said its business in Europe, the Middle East, Africa and Latin America (EMEA/LATAM) was well positioned for “solid top line growth and margin improvement”.

The region, which makes 29 percent of group sales, achieved first half 2019 sales growth of 3 percent driven by demand in emerging markets and in spite of signs of weakness in western Europe, Pernod said in slides presented on Tuesday ahead of a conference call on the region.

The group said it had a “clear strategic roadmap” for the region that entailed driving revenue through innovations and prestige brands, while margins should benefit from measures to cut costs, better advertising and promotion expenses allocation, as well as ongoing organisational changes.

Pernod, which is the world’s second-biggest spirits group behind Diageo, is under pressure from New York hedge fund Elliott Management to improve profit margins and corporate governance.

Last month, Pernod said that between now and 2021 it plans to raise group operating profit margin by 50-60 basis points per year, provided it can deliver annual organic sales growth of 4-7 percent, having achieved 6 percent growth in the 2017/18 year.

The group is targeting 6-8 percent organic growth in current operating profit for its 2018/2019 financial year, that ends on June 30.

(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta)

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