Pernod Ricard writes off €45m advance

Pernod Ricard, the parent of Irish Distillers, has had to write off a €45 million ($63.3 million) advance paid in anticipation of buying Stolichnaya, the Russian vodka brand.

However, Pierre Pringuet, the French group's managing director, denied this meant it was giving up on Stolichnaya. He also said the company would instead focus on bidding for Absolut, the vodka that is set to be privatised by the Swedish government.

Pernod Ricard inherited the right to distribute Stolichnaya in certain countries, including the US, when it bought Britain's Allied Domecq in 2005. Shortly after it signed an amended distribution agreement with SPI - which owns the brand outside Russia - under which Pernod paid €100 million.

A chunk of this was to have been offset against the purchase price in the event that Pernod - which has a right of first refusal over Stolichnaya - were to agree to buy the Russian brand.

However, after two years of negotiations, Pernod's accountants have decided to write off the €45 million advance. Mr Pringuet said that the discussions had been "complex", involving three parties: Pernod Ricard, SPI and the Russian state, which owns the Stolichnaya brand in Russia.

The writedown reflected the reduced likelihood of Stolichnaya being bought, but did not rule out a deal, he said. It also reflected the possibility that Pernod Ricard might buy Absolut, which has also caught the eye of other multinationals. The group would not seek to own both brands.

The writedown emerged as Pernod Ricard announced strong annual results. In the year to June 30th, net profit rose 30 per cent to €831 million as sales rose 6 per cent to €6.4 billion.

Organic net sales growth was 9 per cent as 11 of Pernod's biggest 15 brands, including Ballantine's whisky and Martell cognac, posted double-digit increases in sales by value. Sales of Jameson were up 11 per cent by volume.

There was even a 3 per cent sales increase at Ricard, the aniseed-flavoured aperitif that had been losing ground in its French heartland.