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The owner of Perrier-Jouet champagne said annual operating profit will grow at least 12 percent and pledged to spend more on advertising. Sales of Pernod brands including Ballantine's whiskey increased 11 percent in Asia in the second half. That compensated for a slowdown in the Americas, where revenue fell 1.4 percent.

`"It's good news,'' said Laetitia Delaye, an analyst at Landsbanki Kepler in Paris who has a `"buy'' rating on Pernod shares. `"The management is extremely confident. They are so confident they even plan to further increase advertising spending, which should mitigate a potential slump in consumption in the second half of the fiscal year.''

First-half operating profit rose 15 percent to 966 million euros, beating the 951 million-euro median analyst estimate. Sales climbed 5.9 percent to 3.71 billion euros, Pernod said last month.

Pernod shares rose 1.43 euros, or 2 percent, to 72.37 euros today in Paris, the biggest gain in France's CAC 40 index.

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Eastern Europe Growth:
The stock has dropped 8.5 percent since the start of 2008 amid concern that demand is waning in the U.S., where a housing slump is curbing consumer spending. The dollar fell 11 percent against the euro during the second half of 2007.

Pernod last month raised its target for full-year operating profit to 12 percent from the previous forecast of 10 percent.

"We were able to increase profit through sales growth around the globe and price increases,'' Managing Director Pierre Pringuet said in a telephone interview today. Operating profit had `"double-digit'' growth in all geographical zones as customers preferred pricier brands, he said.

Pernod brands have performed "reasonably well '"in western Europe and ``extremely well"' in eastern Europe since the beginning of 2008, the executive said. "Our sales in Asia are better than ever,'' he added.

Gross margin, a measure of profitability, increased 12.8 percent excluding logistics costs and currency swings, Pernod said. Marketing spending increased 15 percent to 623 million euros as the company stepped up promotion of its 15 key brands in fast-growing markets like Russia and China.

Vin & Sprit:
The French liquor maker is bidding for Vin & Sprit AB, the Swedish maker Absolut vodka. Pernod is also in talks with Russia's SPI Group to buy the Stolichnaya vodka brand, which it distributes outside Russia. Pringuet declined to comment on both negotiations.

The company has said it can't afford to acquire both "Stoli,'' as the vodka is often called, and Vin & Sprit. The distiller is seeking a strong vodka brand to increase the scale of its activities in the U.S., where it now ranks fifth by sales.

"The key sentiment headwind that has offset the strong underlying performance remains uncertainty surrounding whether Pernod will acquire the brand rights for Stolichnaya or for V&S,'' UBS AG analyst Melissa Earlam said in a Feb. 25 note. "Fortune Brands remains the front runner,'' said the analyst, citing the U.S. company that currently distributes Absolut vodka.*

Pernod Shaky in the U.S.

As usual, the 15 strategic brands were the main drivers of growth for Pernod Ricard across the board. They grew 7% in volume and 13% in value overall, thereby demonstrating the very positive impact of price increases and mix effects, said Pernod. In particular, premium spirits grew 17%.

All geographic regions contributed to consolidated sales growth, with an accelerated contribution from emerging countries, up 25%. China, India and Russia were, in that order, the leading three contributors to the sales growth, as premium brands continue to grow. Europe (+15%) and France (+12%) also exemplified "dynamic growth in the first half." Meanwhile, the Americas region fell short with 10% organic growth, hurt by the foreign exchange rate and group structure.

Management raised full year guidance again since it announced first half sales on January 24 from "about 12%" organic growth to "at least 12%."

ABSOLUT:
When asked about Absolut and Stoli, Pierre kept mum. "We shall not speak about vodka. No comment." Things are likely heating up in the Absolut deal and Pernod probably doesn't want to mess anything up.

"While we expect strong organic EBIT growth to be delivered, the key driver of the share price is likely to be whether the company acquires Stolichnaya or V&S. We believe that Fortune Brands remains the front runner for acquiring V&S, and take the view that fears of Pernod diluting returns and earnings are overdone," said UBS analyst, Melissa Earlam.

U.S. BRAND STRENGTH.
The brands that did well in the U.S. were Jameson, The Glenlivet, Malibu, Stoli, Jacob's Creek and Perrier Jouet. As usual, Chivas, Beefeater and Kahlua were not so hot.

First half depletions of Chivas declined -7%. Pierre said that while the U.S. showed negative performance, "we have to keep in the mind the U.S. market is not the best performer."

Pierre remarked that Kahlua is "our only tough spot in the portfolio," as the situation remains difficult in the U.S. Depletions declined -6%, with Nielsen numbers down -2%. However, the company hopes that Kahlua's new marketing campaign, "Dare to be curious," will help the brand in the future.

"We knew it [Kahlua] would be difficult. It has become somewhat time-worn in its positioning... Before it was desperate housewives that used Kahlua as a sort of comfort in their boring, tedious lives...we hope the brand will be repositioned with a more fashionable, youthful position," said Pierre.

Beefeater is also having some difficulty in the U.S. market, with depletions down -5% and Nielsen numbers down -4%.

Jameson, meanwhile, "continued outstanding growth in the US with HY1 depletions up 23% (Nielsen +32%)." Pierre noted that "people say the market in the U.S. is difficult, but for some brands that is not true," as seen with the strong growth for Jameson.

Depletions of Glenlivet grew 5%, with Nielsen up 1% and NABCA up 4%. Malibu shipments grew 4%, with Nielsen up 13% and NABCA up 9%.

Stoli continued its volume growth, in spite of price increases, with first half shipments up 1% and volume up 4%, according to Nielsen.

Jacob's Creek wine saw stable depletions in the U.S. with improved mix, while Montana had "very strong growth" with depletions up 19%. Perrier Jouet also saw "good growth" in the U.S.

Here's what Pierre had to say on the overall U.S. market:

"It's fair to say that what used to perform is still performing and what hasn't performed too well in the past is not performing any better now. Jameson is still performing very well. Glenlivet is still performing very well. Our wines, Champagnes, Malibu, and Seagram's Gin are performing well. Seagram's is a middle of the range product and it's doing well. But we've had problems with Chivas in the recent past. Our positioning is not that good in the U.S. although it's good elsewhere. You see that Chivas' growth is quite remarkable...we have problems with Kahlua and we told you about the repositioning that we've initiated. We hope the new position "Dare to be Curious" will be more appealing to consumers. We've had some problems with Beefeater but there too the campaign is being launched in the U.S. market....with Chivas we haven't settled the problem yet. With Beefeater and Kahlua we hope the new positioning will be successful. So we're not bearish about the U.S. So how long will this last? Everyone tells you that's there's a crisis looming, so it's hard to tell....some people think the crisis won't land too long and I tend to share that view."**

Sources: *”Pernod Lifts Target After First-Half Profit Gains 18%,” Ladka Bauerova, Bloomberg; **”Pernod Shaky in the U.S.,” Megan, Wine Spirit Daily, February 29, 2008