Julia Massies - VP, Financial Communication & IR Alexandre Ricard - Chairman and Chief Executive Officer Gilles Bogaert - Managing Director, Finance & Operations

Hermine de Bentzmann - Raymond James Trevor Stirling - Sanford Bernstein Simon Hales - Barclays Olivier Nicolai - Morgan Stanley Laurence Whyatt - Societe Generale Mitch Collett - Goldman Sachs Carl Walton - UBS Chris Pitcher - Redburn

Good morning, ladies and gentlemen and welcome to Pernod Ricard’s First Semester 2017 Results Presentation. We are hosted today by Alexandre Ricard, our Chairman and CEO, and Gilles Bogaert, our Managing Director Finance and Operations. We will follow usual formats went through the presentation and then give you a chance for Q&A. So without further delay, let me hand over to Alexandre.

Thank you very much, Julia and good morning to all of you. It was wonderful Absolut Lime ad. It’s not yet time, it’s for tonight though. So let’s go directly - let me start directly with the executive summary. We can qualify our first half results by being strong with the continuation of performance improvement both at sales and profit from recurring operations level. They are both growing by 4% organically. This is driven by a strong growth continuing in the U.S. of 5%; for Jameson worldwide, up 20%; and from innovation, up 22%. Improvement as well in China, back to growth in Travel Retail, strong growth in Russia and as well turnaround of Absolut globally good growth for Martell and improvement for Chivas. There has been a temporary adverse impact of the demonetization leading to growth deceleration in India where we posted just 3% net sales growth. The price mix is turning positive, albeit pricing remaining somewhat subdued. Sales and profit from recurring operations, organic growth should be 3% if restated for the earlier Chinese New Year, in line I would say perfectly in line with our full year guidance of profit from recurring operations anywhere between plus 2% and plus 4% . Last but certainly not least, very strong free cash flow at EUR 658 million, which is a growth of plus 34% versus last year’s half year results. This is based on a consistent implementation of our midterm strategy. If I recall the key points there, it’s out operational efficiency roadmap. Implementation is on track up to 2020. It covers manufacturing, its covers procurement, A&P and all of our supply chain. We also have implemented new organizations in the U.S. We now have our global travel retail unit and as well in China with the creation of a second route to market for our premium brands portfolio. We continue to proactively manage our portfolio with the acquisition of a majority stake in Smooth Ambler which marks our return to the bourbon category and the disposal of the Domecq brandies and wines in Mexico. We sustain our A&P investments behind our market spreads and innovations. And speaking of innovations, they have contributed 1% of our top line growth. They have grown altogether by 22%, driven principally by Jameson Caskmates, Lillet outside of France and Olmeca Altos specifically in the U.S. While you have here the key figures, I am not going to go through then we spoke about them. And if we look our sales, while you see our 4% organic growth relatively no impact on group structure. And a 2% impact on top line which obviously is not the case on the bottom line or I would say on the EBIT line. Our Q2 sales are up 4% which are perfectly in line actually with our Q1 sales. So from a regional point of view, the 4% top line growth is 7% in Americas, 3% in Asia rest of the world and again 3% in Europe. So starting with the Americas region that grew 7%. And let’s start with the United States, the most important margin both in Americas and globally for us. We posted 5% growth. The market is still dynamic. It will be with a slight growth slowdown in Q2 based on Nielsen value reports which now stand at plus 4.4%. These are the full year calendar year 2016 value numbers. They were closer to 6% a year ago. The premiumization continuous in the U.S. market, the more you go up the ladder, the stronger the growth. Pernod Ricard USA continuous its good performance, part of it is favored by some shipment facing and I think it’s worthwhile noting that we will recycling a pretty strong Q3 this year versus last year. Bear in mind last year are major are greatest distributor had an ERP migration which forced us to ship a quite a lot in Q3 last year. Our underlying I would say value performance is slightly above 3%. We have a positive price and mix in the U.S. And the organizational changes we shared with you six months ago are in line with a roadmap over there and they are being implemented. If you look at our underlying performance by brand, you see very strong momentum from Jameson, up 19% both Nielsen and NABCA value, just 1% disappointing versus the global performance of the brand which is up 20%. Absolut Nielsen’s are down 5%, NABCA down 1%, so the underlying performance is anywhere between these two numbers, basically a little bit more difficult than anticipated drive by a very or an increasingly competitive vodka segment from a pricing point of view in the U.S. We still target to stabilize the brand medium term. We’re launching and you saw the ad, we’ve started launching Absolut Lime few weeks ago and Absolut Elyx is posting some strong numbers as well, all been from a low base. Malibu good growth anywhere between 2% to 6%. Glenlivet, it’s a transition year for the Glenlivet as we are transitioning into founder’s reserve which is a non-age variant of the Glenlivet franchise. Very strong growth, double digit growth with Martell including by the way the launch a few months of Martell Blue Swift. And I mentioned the acquisition of a majority stake in the West Virginia Bourbon smooth Ambler. The rest of the Americas, so excluding the U.S. we posted net sales growth of 10%. Good return to growth of Travel Retail Americas which last year was struggling, so up 14%. And this growth is driven partially by Martell which is expanding its distribution across all U.S. airports. Solid growth in Canada as well driven by Jameson, Wiser’s and Jacob’s Creek and we also acquired a gin called Ungava gin under a company called Pinnacle's spirits. Slow environment in Brazil minus 10%.The market conditions are still challenging. The decline has been emphasis by unfavorable technical impacts. If you recall, we had shipped quite a lot in December 2015 ahead of a price tax hike. Cuba strong double digit growth, driven clearly by tourism. And finally continuation of strong growth in Argentina partly favored as well by inflation. If we move on to Asia rest of the world, we could say it’s a contrasted situation, up 2% globally for that region. Let’s start with India, plus 3%, which we would qualify as good resilience in a period of several adverse regulatory changes. We had mentioned a few. We had not anticipated nor head any engine consumers anticipated the radical demonetization of the markets back in early November. So 500 and 1000 rupee bills overnight were basically no longer legal. So this had - this mainly impacted our local whiskey brands with better resilience of the high end part of our local whiskey portfolio with Blenders Pride. Obviously those who have bank accounts, credit cards and more affluence are not really impacted by these measures. So we see the continued double digit growth of our imported sprits portfolio with both positive volumes and pricing. It’s true, it’s still expected to be effected by further impact of the demonetization. Let’s say till the end of Q3, till the end of March, we are starting to see the situations stabilize, but there is new news now with the Supreme Courts banning as of April 1st the sale of liquor within 500 meters of national roads and highways. The GST tax implementation has been pushed back to let’s say summer of 2017. The medium term growth potential remains absolutely significant in India. We see continued trading up of the immerging middle class, there is no doubt about this. And we’re very nicely positioned in the premium local sprits category which is the most dynamic category. For China, plus 4% which if we adjusted for the Chinese New Year earlier shipments is stability. There is a clear improvement versus fiscal year 2016. Last year we posted 9% decline in China. This improvement is clearly driven by Martell, up 10%. With all this skews or all of the range growing so obviously Martell Distinction and Martell Noblige, but this is the new news recovery of Cordon Bleu back to growth as well as Martell XO. The scotch whiskey side I would say the Super Premium scotch whiskey side is still struggling. The new commercial and marketing organization focusing on our premium brands is now implemented. As for Africa and Middle East up 3%, we see a growth deceleration basically related to macroeconomic and geopolitical issues. Our strategic international brands are continuing to develop and specifically Chivas, Absolut and Jameson who posted good both volume and pricing. Japan, up 6%, continued strong growth and specifically double digit performance for strategic international brands clearly driven by Perrier-Jouet but as well and by our Scotch portfolio and Beefeater. Premiumization is driven by pricing in Japan for the second year in a row. Continued difficulties in Korea for ourselves and the market generally speaking with double digit decline due to adverse market conditions, destocking and the transition into the new organization. Travel Retail Asia, we see there are some very modest decline. That being said it is improving versus last year. There is some delayed consumer - customer negotiations I think in Malaysia by the way. And the Scotch category is still facing some tough market and competitive conditions there. Last region Europe where we posted a good plus 3% in Europe. So to start with Western Europe, up 2%. We see France 6% which is obviously driven by that big migration thing that happened a year ago. This is the last year we’ll be carrying this technical impact. If we adjust for that the Pernod Ricard in France is broadly stable. Spain posted a good growth of 5% principally driven by the huge success of Seagram’s gin there. But also a good performance of our Whiskey portfolio, Chivas, Ballantine’s, The Glenlivet posting very good growth and also our wines principally driven by Campo Viejo. UK good progression of 7% clearly above market trends, so we are gaining share with continued good performance or strategic international brands and we can mentioned Jameson, Absolute, Chivas, The Glenlivet and I would actually add a Plymouth Gin and good wine performance as well drive by Campo Viejo. Strong growth in Germany driven by share gains with very good growth of Absolut Ballantine’s and Havana Club and continued success of the aperitif segment with very strong growth of Lillet which is one of our priority innovations outside of France and the continued development of Ramazzotti. Travel Retail Europe remains a challenge in a context which is still tough. Easter Europe overall posting 11% growth driven by Russia principally up 15% which is posting strong market share gains in a market which is probably just slightly growing. With strong growth driven by our strategic international brands again, we can mention Ballantine’s, Jameson, Absolut but also one of our local brands our minion brandy called Ararat. And good growth as well in Poland where we are gaining market share in an environment which remains extremely competitive especially for the scotch. We are growing there an also with Absolut as a brand. Very briefly from a brand point of view, our strategic international brands there are 13 of them are growing 6%. I think we hadn’t seen this in a while, so our strategic international brands are driving our overall performance. Strategic local brands posted a 1% growth and clearly with a temporary impact negative impact of our Indian Whiskeys and finally some modest growth for strategic wine portfolio which posted a 2% growth. I think it’s important to mention that our innovation portfolio has grown by 22% which represents roughly 1% incremental top line growth. So I mentioned it earlier on Jameson grew 20% its net sales globally driven by the U.S. but also by Europe, Africa and Middle East. So we spoke about 19% in the U.S. where the brand is now the largest brand there. But strong performance as well in Europe particularly as I mentioned in Russia and the UK, good growth as well in Africa and Middle East which includes as well our innovations under the Jameson franchise with Jameson Caskmates and Black Barrel are select reserve as it’s called in South Africa. Martell up 7% with a return to some growth in China, up 10% impart favored by the earlier Chinese New Year. But good growth also outside China principally in the U.S. with double digit growth on our panels there and Travel Retail Americas where we are growing our distribution and return to growth of Cordon Bleu in China. Absolut plus 1% which basically means return to growth, last year where we down 4%. So still some headwinds in the U.S. driven by a very increasingly competitive Vodka segment with a lot of pricing going on, but strong development of Absolut Elyx. In outside the U.S. which represents basically two thirds of the volumes of that brand has grown its net sales by 6% driven principally by Europe and Latin America. Our Scotch whiskies, Chivas is down 1% with some slight improvement in Q2 we were up 1% with brand. So we’re starting to see some comeback there last year we posted a decline of 4%. Glenlivet is flat as we transition into the non-age counters reserve variant very strong growth for Ballantine’s of 6% which is driven by our premium expression Ballantine’s Finest with good growth I would say almost everywhere. Royal Salute up 3% driven by India and Taiwan and overall for the other spirits we can talk about good growth as well Mumm up 2%, Jouët 9%, we got two partially favored by the technical impact Beefeater up 5%, Havana Club also 5% and Malibu up 7% principally driven by the U.S. but also very strong performance in the UK to mention, but a few. Our strategic local brands I mentioned the softening for Indian whiskies which we believe is clearly temporary were at pure consequence of that demonetization. Good growth for Seagram’s Gin, in Spain, Altos driven by the U.S. and Ararat driven by Russia and declined I mentioned it in Korea for Imperial and Passport due to one of its largest market Angola where we decided proactively limits ourselves there. Strategic wines I mentioned up 2% clearly driven by a Campo Viejo in the UK, in Spain and in the U.S. by the way and Jacob’s Creek in Pacific which with the innovative variant Double Barrel and some negative pricing obviously on our wine portfolio coming from the UK and also the U.S. Very briefly on marketing innovation some of you may have heard that our new Mumm CEO as Usain Bolt what I mean by CEO is Chief Entertainment Officer, Jameson Black Barrel we briefly touched upon it, but we design for Beefeater very well accepted by the market new campaign with Novak Djokovic for Jacob’s Creek and Havana Club, new pack and new campaign as well for a Clan Campbell. Here in France Smooth Ambler you have here one of the expression the Old Scout Single Barrel Bourbon expression of the brands. Well some activation around the [indiscernible] we also now created the Martell foundation in Cognac with this building and which we had entered it in heritage from Martell. Innovation as well around our Cuban rum back Navios which is clearly trending on the craft trend, Absolut Lime I already mentioned it which has just been launched. From a digital point of view as well as with coconut which is a huge success over the summer especially in the UK some other CRM programs we took probe but we have CRM programs that are developing across every single markets. E-commerce is the fastest growing channel for Pernod Ricard and it’s also important to talk a little bit about our sustainability and responsibility initiatives we resign for the seventh consecutive year our responsible party program with the U.S. listed network across Europe there is the water in India initiatives. There is also the roll out of our smart barometer where you can actually go on our website and see where we stand vis-à-vis all of our commitments. And I will now pass on to Gilles to talk a little bit about our financial performance.

Thank you, Alexandre. Good morning, everybody. So let’s go for the figures of the financial performance starting with the overview of the P&L. So as we said our organic growth of profit from recurring operations was growth of 4%, it’s would be 3% when we stated for earlier stage in the year which is consistent with our full year guidance of 2% to 4%. So gross margin was down by 31 basis points, price mix turned positive which is good, but pricing is still subdued. We had to tight management of our cost of goods sold thanks and particular to our operational efficiency initiatives, but on the other hand also had the negative impact on some new taxes in particularly import duties in particular in Vietnam, and also some a significant increase of a great news for spirits in India and significant increase of the Agave cost in Mexico. A&P was up 1% as remind you we’re lapping strong increase in last year second half from the gross and we also have numerous initiatives to drive overall a stronger efficiency on our marketing investments. We kept having a tight management of our structure costs and at the consequence we had a slight improvement in the operating profit margin up four basis points up to 29.6% and Forex impact was almost neutral in the first half, you’ll see the difference effect gross driven by the organic evolution of the profits. .: For the full year or 2017, we expect based on current rates extrapolated at the end of the year from a positive Forex impact on the operating profits of EUR80 million. So this positive price impact will be almost exclusively focused on the second half of the year. Let’s have a look at the performance by region. So first of all, as you can see we have a good balance between mature markets and emerging markets and both contributed to Pernod Ricard growth in terms of sales 6% for emerging markets, 3% for mature markets. Summarizing by region as you can see a good balance of Pernod Ricard exposure to Asia, Americas and Europe. So let’s start with the Americas, Alexandre commented the sales what you can - so we had strong sales growth. So gross margin rate was up 17 basis points, thanks to a positive mix in the USA driven by optimization of the portfolio, A&P were up 7% in line with sales growth and we had a strong enhancement of the EBIT margin, thanks to premiumization tight management of resources and also Forex. So EBIT margin was up in the Americas from 29.2% to 42.4%. Asia, rest of the world, we had some modest growth organically as the operating profit from recurring operations 1% that’s had a bit lower than the sales which were up 3%. The gross margin was down 100 basis points you may need to some cogs per share in India. For India expense probably for half of the increase of the gross margin in Asia rest of the world including as we said earlier the grand new transparency increases in few of one-offs. We had new taxes also in the region in particular in Vietnam and also some promotional phasing between H1 and H2, and some tough commercial conditions in Travel Retail. A&P was down, but we maintain the investment behind key strategy priorities like for instance Martell in China. And so EBITs was slightly up organically, slightly down as a result to figure many due to the Forex impact due to the adverse evolution as we saw earlier of the Chinese yuan. Europe, as shown growth of operating profits organically at 4%, ahead of the growth of 3% of sales, we had an improvement of gross margin that you may need to mix, we kept having at tight management into resources both in A&P and structure cost and as a consequence we’ve been able to grow our operating margin rates by 18 basis points organically up to 25.5%, so leveraging as of better mix and also this tight management of resources. As I said this we go through the P&L below the EBIT line. Let’s start with financial expenses so going in again in the right direction that’s an improvement by EUR16 million first of all, because of the reduction of the cost of debt from 4.2% last year to 4% in this first half. Thanks to bond refinancing and by the way because of that we keep decreasing at the end of the fiscal year because it was a full year it will be down to 3.8%. We also benefited from an improved cash flow and also a very slight positive price impact of EUR1 million because the dollar was almost stable during the period of time. Corporate income tax on recurring items up from 24.7% to 25.7% once close to the 26% we had guided for the full year. So as a consequence the Group share of net profit from recurring operations is up 5%, thanks to the 4% growth of the operating profits. Thanks to the reduction in financial expenses and despite slightly higher tax rates. Non-recurring items not very significant and so the Group share of net profit non-recurring items is up 3%. Let's spend a few minutes on the cash flow and debt so it was a very good semester for the cash, free cash flow was 54 basis points that is to say EUR168 million above last year. So it was partly favored by phasing, on the one hand we had a favorable variable of strategic inventory, thanks to optimize management of scotch inventory and supply. We also enjoyed a positive working capital variation impacted by the favorable phasing so is part is technical, but also some optimization with good inventories and as you know it is part of our operational efficiency roadmap GSO was stable. So we kept at tight management of our receivable. CapEx was slightly down is the first half mainly due to phasing for the full year, we expect CapEx to be stable or modestly increasing. And financial expenses were down thanks to the lower cost of debt and the improved cash flow. You have here the evolution of the debt, so mainly due to the net cash generation which was positive EUR154 million. That's a net cash management is after dividend, so that's a very good performance because normally net one is tends to be negative because of the fact that we pay the full dividend in the first half, and also because of the adverse seasonality on the working capital. It's a strong improvement as compared to last year, because last year it was down EUR60 million and this year is up EUR134 million and as a main driver for that improvement is as a recurring free cash flow improvement that we commented before. Despite that the net debt is up EUR257 million up to EUR1,953 million largely due to the adverse concession adjustments as you know the closing rates euro dollar was EUR105 whereas it was at the opening of the period EUR111 and so as a consequence it leads to a negative transition impact. As you know we have a 62% of the gross debt in USD which by the way we reduced to down to 57% in January 2017. We rebalanced more or less EUR1billion - EUR0.5 billion from EUR2 billion. In terms of leverage net debt to EBITDA ratio is below 3.4 measured at average rates. It's an improvement as compared to the one we had at the end of December 2015 it was 3.6 and it’s an improvement by 0.1 as compared to what we had at the end of June six months ago despite the adverse H1 cash seasonality. So I hand over to Alexandre for the conclusion and the outlook.

Thank you, Gilles. I think what we can say is that these results basically confirm the gradual improvements we're on from a performance point of view which is fully in line with our strategic roadmap focusing on our key markets, key priority brands, innovation and operational efficiency. So a strong first half consistent perfectly in line with the outlook we provided to you in September. So for full year fiscal 2017 in an uncertain environment we expect good growth to continue in our number one market U.S., good growth to continue for Jameson globally and for our innovation portfolio. We're also expecting to improvement versus last year for China and for our two brands that posted declines last year which are Absolut and Chivas. We do expect and that was this is new a temporary deceleration in India due to one off regulatory measure of demonetization and a few other headwinds from a regulatory point of view. We will keep on focusing on our operating margin and cash flow as the H1 shows with our 2020 operational efficiency roadmap and strong cash flow generation. And as Gilles mentioned we expect obviously based on exchange rates of 31, January projected throughout the year a positive FX impact on our profit from recurring operations of roughly EUR80 million. So based on this we rate and confirm our fiscal year guidance of organic growth of our profit from recurring operations anywhere between plus 2% and plus 4%. And I’ll hand it now to Julia and get you back before.

Thank you, Alexandre. We'll take your questions; now we’ll start with questions from the room. Q - Unidentified Analyst: Thank you, [indiscernible] from Bank of America Merrill Lynch. Three questions please. First one if assuming that the Border Adjustment Tax in the U.S. is approved, what's the plan are there any brands that you could move production to the U.S. or maybe export some from the U.S. to offset it? That's the first question. Second one on China. If you could comment please little bit more on the Chivas performance there and if we think we're close to the end of the declines in Chivas in the whiskey performance in China and what do we expect going forward? And then third and last you mentioned the competition in - the strong competition in pricing in vodka in the U.S. So just wanted to understand if you are planning any price adjustments from on Absolut? Thank you.

May be Gilles you want to take the Border Adjustment Tax and I’ll take the other two?

Okay, well we don't know what is going to happen so there are many uncertainties. As you know yes, the border tax is one of topic which is being discussed, but there is also a stronger position against it, because it could lead to inflation in the U.S. and as a consequence it’s going to have an adverse impact on consumption in the U.S. So I think we really don't know what is going to happen. Well it's sad to say that you know we have some an important part of the business in the U.S. which is important. As you know our brand that were stronger gin, so we are not producing our brand in countries based on competitive costing country by country, we produce gins because it's an Irish whiskey we produce nothing in France, because it's a cognac and hence we have a stronger gin. And I think in also discussion that takes place it's an important argument that we obviously are using. As you also know even if some trade agreements could potentially be adapted by the U.S. Russia’s WTO rules that apply which are quite positive, I would say around for spirits as there are many tariff rules for spirits in the WTO rules. And then for the rest in terms of manufacturing footprint on bottling we have some sensitivity that we on the tactical basis have used in the past that we could potentially use if needed, but I would say the central scenario to keep selling premium brands with a stronger gin at the good prices over the world.

Okay on whiskey generally speaking first in China you have three types of categories, let's put it that way, you have premium Scotch, you have single malt and you have super premium blends. For the whisky market generally speaking is starting to stabilize that being said within our whiskey portfolio we're still struggling with Chivas as a brand whereas for instance the Glenlivet which is our single malt or Ballantine's Finest which is our premium scotch now part of the premium brands with market we put in place these are growing, so there is some work to be done I'm sure as a brand. We've mainly focused a lot of our efforts and investments for the last couple years behind Martell, which is now paying dividends. On vodka in the U.S. yes we have seen over the last 12 months a lot of pricing activity within that segment, which is affecting the performance of Absolut as a brand, and I would say our challenge from a pricing point of view is not to lower our price. But to be more efficient from a promotional strategy point of view, to really, really I think it's the last three feet challenge of being efficient in terms of promotional effectiveness. So that's what we're focusing on with Absolut and of course, we have our innovation with the Absolut Lime which was launched three or four weeks ago and also premiumization which is driven with the Absolut Elyx which has a pretty high price I think it's now the most expensive super premium vodka brand of size in the U.S.

Okay, another question from the room. So we’ll move to our callers please.

Next question [Technical Difficulty].

Well, first on the highway liquor store then it's difficult to get into specific details what is the highway first of all, how are local states going through react to that. We can say that between 30% to 50% of outlets in India that are within 500 meters of highway and national roads. So then the question is what cost and what is going to be the cost to move point of sale from these outlets to outlets outside of the 500 meters. So today it's still difficult to say obviously we will adapt as we start seeing more with more clarity what's happening there, but again there are a lot of question marks what is really a highway and how we - basically how we're going to transport point of sale in outlets to outside of this parameter and what will be the reaction of local states. In terms of Q3, no we don't believe it's a question of destocking, we believe what's happening in Q3 is the normalization or I would call it adaptation of the Indian consumer to the new monetary rules. So we believe by the way that demonetization impacted underlying consumption anywhere between 10% to 20% we believe it's temporary basically November, December, January and we're starting already to see a stabilization of that impact and we believe by the end of Q3 demonetization will be behind us because the consumers will have fully adapted to that new environment. And again as I said during the presentation you see that consumers who have bank accounts and who have credit cards and who are a bit more affluent we're not at all impacted by that because our strategic international brands continued their double digit regular growth. So it really hit the bottom end where basically people didn't have bank accounts weren't ready to adapt to this measure and as you know the economists are even struggling to see how this globally impacted the economy, but everybody's in line to say this is basically temporary, and will pan out and I think it will pan out at the very end of Q3 it's over. On Cognac versus scotch, well it's fair to say that the Cognac category is much more relevant right now in China, because all of the Cognac players have invested heavily behind Cognac whereas on scotch it was more and more limited from that point of view. To give an outlook on the second half for China globally speaking by the way is quite difficult Chinese New Year had its peak last week, last weekend, and we will have the Tier 1 and Tier 2 sell out numbers not before mid-March and consumer sentiment and there are internal panel numbers now before mid-March. So difficult to say, but what we can say with confidence is our performance this year will notably improve versus last year.

Thank you. And just a quick follow-up for Gilles perhaps just on your FX guidance, are you able to talk to the potential benefit for 2018 given that your guidance of EUR80 million as almost exclusively focused on the second half of fiscal 2017?

Well we don't give the guidance yet for the following year. What I can say is that's within the EUR80 million for the Forex for the full 2017 year, EUR25 million are coming from the sterling pounds. It's not the full impact we expect from the weakest in pound, because part of it was hedged till Q1 of the next fiscal year. So on that part we could expect have a positive impact still coming in the following year. Then on the other currencies I think it's far too early to predict anything for fiscal 2018.

Okay we’ll take another question from the room please.

Hi good morning, Hermine de Bentzmann from Raymond James. I have few questions, the first one regarding A&P is the ratio was significantly down in H1 this year, I was wondering how we look at it in full year in terms of percentage of sales as you've mentioned increase in H2. Then on the pricing you’ve mentioned subject pricing so far also how do you see it evolving throughout the year? And third I was wondering if on China on Cognac you could give us some more colors on the depletions trends in volume and value maybe? Thank you.

It is on A&P there are some phasing for instance we stepped up our investment in A&P in China ahead of Chinese New Year, so January, February. There is also some placement of A&P in the U.S. market with the launch of Absolut Lime which occurred three weeks ago. So you should expect broadly speaking A&P to be stable from a ratio point of view give and take over the full year. And pricing you give any…

Well pricing for the full year should remain subdued even if we expect maybe it should be even better than H1 because partly due to some promotional phasing which added net impact on H1. It's obviously for variety going forward for me to I mean to focus on pricing to improve that. Leveraging is inflation which starts to get a bit higher and leveraging all our internal initiatives to be better at pricing and to get a better promotional efficiency. So there are many initiatives taking place at Pernod Ricard to be able to improve the pricing in the next year, but this year it will remain some good even it should be slightly better than H1.

So for Cognac and the Cognac segment is growing in China. Martell grew over the first half value wise 10% with all of it - all its family growing, so distinction which is always grown Noblige as well. Back to growth of Cordon Bleu which is critical. So that's a good piece of news and growth of Martell XO. So I say all of the key segments are growing for Cognac and Martell in particular. If we're just for Chinese New Year we're still around mid-single digit growth probably value wise and for the full year it's difficult to say again based on Chinese New Year results, which will had in a month or so.

I would appreciate that very consistent with shipments we posted the boss or positive impact in Brazil and Chinese New Year.

Okay we’ll move to our callers now please.

Next question from Trevor Stirling from Sanford Bernstein.

Good morning gentlemen. I guess most of my questions answered, but one question perhaps Alex, the slowdown you talked about in the U.S. that we've seen in the Nielsen and NABCA. Can you give us some color and what you think might be happening there?

Yeah, actually it's amazing because when was it two days ago or yesterday, we got the new Nielsen's for January. Right now, I would say there was one point slowdown in terms of 12 months trends. So again a year ago we were seeing the market is growing from a Nielsen point of view, Nielsen value at 5.9. Today that like-for-like number is 4.4 which basically means if you had NABCA states and an un-trade the numbers were probably went from a 5% type of - 4.5% to 5% growth rate to anywhere between 4% and 4.5%. Is it a temporary slight slowdown you know let's wait and see because all of the underlying fundamentals in the U.S. are good, I mean the economy is growing, unemployment slow, inflation is coming back. So the fundamentals are good, the market is still strong, I mean 4.4% Nielsen value numbers are fine and these numbers have slightly increased in January. So I wouldn't draw any conclusions at this stage, but it is fair to say that there has been a slight slowdown is it temporary or not, I don't know, but the market is still strong.

Thank you very much Alex.

Next question from Simon Hales from Barclays. Please go ahead.

Thank you and morning gentleman. Three questions please. I mean just sticking with the U.S. please, can you just talk a little bit explain the phasing moving in Q2 a little bit more please Alexandre, how much of the benefit that was to the quick you to numbers and how we should think about unwinding in the third quarter? And secondly could you give us the share of local premium Indian whiskey that you saw you think through the first half do you think you've gained or lost share again should be competitors there. And perhaps finally just around Chivas so once you just talk a bit more generally about the global outlook for that brand it's not one that does having any particular areas of innovation in the presentation coming down the tracks. Is it a broken brand or should we expect you to sort of step up that’s behind that product over the next six to 12 months?

Sorry, what brand do you refer to for the first question?

Chivas.

Okay, on U.S. facing our net sales in the U.S. grew 5% or underlying value depletions or slightly three-ish a little bit above three-ish, so the difference will probably come down in Q3. That being said our full year expectations for the U.S. basically our continuation of our good growth there anywhere in the single mid - single mid digit segment let’s put it that way. So it's really a phasing issue shipments and depletions. Vis-à-vis scotch your question was specifically scotch in the U.S.?

Whiskies.

Whiskies, generally speaking in the U.S...

They were two questions, almost around Indian and Indian whiskey your share of local premium and how that's moved you think to the first half and the second one with the global question around Chivas?

I’ll share of the category of the premium local Indian whiskies 47% where it was 37% years ago, so it moved up to 47%. And we've held our shareholder the last 12 months in India from that point of view. Vis-à-vis Chivas was down last year minus 4% heavily impacted number one by China, number two by Travel Retail as well. And Travel Retail specifically Americas and Latin America because of the USD strong appreciation. The brand so far for the first half is down minus 1% which is an improvement for Chivas as a brand and we expect this improvement to keep going. So it's not a broken brand, but it's a brand behind which we need to invest more basically.

Okay thank you so much.

Next question comes from Olivier Nicolai from Morgan Stanley.

Hi good morning, I got three questions please. First of all in Brazil H1 decline 10% that was mostly technical on an underlying basis what you think the market would do into next 12 months. So only on could you give us a bit more color about the depletion between on trade versus the off trade? And lastly for Gilles how much of your income tax paid really to the U.S. and do you expect to material benefit is the U.S. corporation tax dropped from 35% to 20%? Thank you very much.

Well on Brazil. Yes minus 10% it's partly negatively impacted by zero we had last year ahead of the tax increase. That's in the market is still down and we are down enormously 9% with the markets. For the next 12 months we would expect against the macroeconomic indicators that things could get better thing gross GDP gross is plan to come back in Brazil we’ve been able to increase our prices, so we're hopefully in the next 12 months will we start to see some improvement there and I think we’ve done a good job on our key strategic brands there Absolut, Chivas and Ballantine’s. We getting shares in the last few years on the most of all brands, so our intention is to keep growing those brands there. In terms of China, and in terms of depletion that we said depletions are well aligned with our shipments that’s in terms of underlying trends clearly the off is doing better even is strongly up. Even if when we speak about the half part of it is bring your own it means people buying in retail outlets and then bringing the bottle to restaurants for lunch or dinner. So at the end of the day the consumption is largely on, but let's say from a channel stand points of is doing far better than offers standing in China. And in the U.S. well you know there are many no different elements and pieces that have to be thinking it's an account in terms of tax impact in the U.S. yes obviously today's the corporate tax license of U.S. is not far from 38%. So if it was to go down it could be a good news, but you also need to take into accounts of elements like for instance what could happen on the bordered tax topic with U.S. tax remain down on the world wide basis or will become more national based tax. What will be the impact from a cash standpoint, I think last year many open questions on that that, but we will welcome the decrease of the corporate tax rate in the U.S.

Thank you very much.

Our next question comes from Laurence Whyatt from Societe Generale.

Hi good morning, thank you for questions. First question please is on the U.S. and again on the tax regime, I just wondering just to help us understand the potential impact of border tax, could you clarify which of your products are produced in the U.S? The second question on China, one of your competitors is showing very strong growth at the high end of the Cognac market, we understand your strategy to shift towards more premium end of the market rather than the prestige market. How can you be confident that is the right strategy in the current environment? And my third question just a technical question on Europe. What is your organic growth rate in Europe which excludes the French technical impact? Thank you very much.

So your question on the U.S. and on tax, let's say that's almost three fourth of what we said is very important Jameson is important absolutely important, Chivas delivered on the other hand Kuluvan [ph], Malibu, Seagram's Gin [indiscernible] liquor, Kenwood are produced in North America, and we have bottling facilities both in the U.S. and in Canada in the in North America.

Okay on China so back to growth of the XO segment and also what we call QSS segments which are the ultra prestigious segments. Bear in mind that our market share in the ultra prestige segment is very low it's quite insignificant, our stronghold is both on the VSOP category with Noblige and XO category with both brands Martell Cordon Bleu and Martell XO by the way. And all of the segments in the Cognac category are back to growth. So Cordon Bleu and XO which are now growing, we expect that we threw in the corner from that point of view at the XO category range. As for QSS it is not really impacting us, because we're not present in that segment. I mean we have a lot from Martell it's really limited from a volume point of view.

And on your last question on what would be the growth of Europe excluding the French technical impact it would be close to 2% and 3% we posted in the first half. At the group level even by restating the French technical impacts so top line growth would still be close to 3% to give it was a change in yearly statement.

Very clear, thanks very much.

From Goldman Sachs Mitch Collett on the line.

Hi there on Europe you had pretty strong growth from Spain, UK and Germany, but I think Western European sales were up to is the different the decline in Travel Retail Europe and can give us a bit of additional context on why that was weak? And secondly on the cost to debt you’ve guided 3.8% for the full year it was 4.9% in the first half that implies the second half would be lower than 3.8% is that a reasonable stage for the next year's interest cost? And then finally on the benefit from transactional FX I appreciate you don't want to guide to next year, but what proportion of the all pound exposure was hedged?

Okay on Europe clearly it was a consequence of our Travel Retail unit, so Asia which was in slight decline and Americas which was in strong growth. Europe is still struggling a number of factors there again Eastern Europe, Russians that have significantly lowered their shopping in Travel Retail again because of the ruble depreciation over the last couple years it's still hitting is. Number two while basically terrorists’ attacks over last summer in Turkey didn't help as well. So we have both the currency context and the terrorism context which have had an impact on our duty free sales across Europe.

On your question on cost of debts yes it will go further down in the second half, partly if I get some bonds are coming to maturity and we already redeems $850 million bond in January and we are going to reimburse EUR1 billion bonds with a 5% coupon in March so this will contribute to a further decrease of the cost of debts. For fiscal year 2018 is still bit early to give you guidance, because you’re trying to taking to accounts so rates increase in the U.S. but we would expect to be able to maintain lower rates maybe modestly better than the one we have for fiscal year 2017.

Thank you we’ll take two final questions from our callers please.

Next on the line we have Carl Walton from UBS.

Thanks for the question. I had just one clarification from me, just on marketing spend, you’re saying kind of similar rates in the second half to the kind of 17.8% for the full year, and we still should think about the midterm guidance of 19% kind of raising back going forward or should we think about a low rate because the efficiencies you’ve made are more prominent? Thank you.

When I say that broadly a stable rate for the full year it was versus last year so closer to our full year 2019 rate and that's 17.8% which is skewed over only just one semester.

Okay that’s very clear. Thank you.

And there was the first question we have an attention which was on the GDP, I think we are almost 100% hedged from an EBIT standpoint on the GDP till Q1 2018. And we are not hedged after that.

Okay. Our next question comes from Chris Pitcher from Redburn. You might have to un-mute your line sir.

Hello good morning. Gilles could you explain what you mean by optimized management of your scotch inventories, could you say what that means in reality and what do you think the working capital requirement for strategic inventories would be for the full year. And I was wondering you were actually several times about the new premium sales force in China being in place. Can you say whether they had any impacts in the period just reported and what aspirations you have for that part of the business? Thanks.

Where on scotch inventory as we do on the permanent basis we compares the inventory we have with the growth forecasts we have for the future. And because of the recent deterioration we had on this gross we decided to reduce both distillation and external supply, so as a consequence this year there are a few tens of millions euro of cash out less spends on the scotch, because of that discipline management of inventories in line with future growth forecast, so that's a positive impact on the cash flow for the current fiscal year, it could then go back probably two or three more cash out in the years to come.

I think previously you’ve talked about EUR 180 million, EUR 190 million of cash out flow for strategic inventories of that full year numbers. Does that mean that you're talking a significantly lower figure for this year?

No this is a variation of strike inventories including all of the brands and all categories so we don’t specific to scotch. And this is not the cash out, the cash out is higher than that. The cash out is more or less than EUR 100 million so EUR 880 million is the increase of the strike inventories that we have every year and that's a figure that you normally saw in the you know normally seen in the free cash flow statement, in the cash flow statement. I think for the full year it will probably be a bit lower than the one of the previous year. The duration of the staring inventories will be not as high as the EUR 180 million that we had the previous year, because of that tighter management of the scotch inventory.

And as for our premium sale force in China, we announced that new organization in early summer now to set up a new organization it take some time. So it took all the way through to end of the summer to have this sales force in place with all the training that's now taking place. So it's it would be little bit aggressive from my part to say that they already had an impact. Now they're focusing on the premium side of our portfolio with some strategic priorities such as Ballantine’s Finest such as Absolut and The Glenlivet and of course or our wine brands are specifically Jacob’s Creek. But they also have all the other brands of our portfolio Beefeater, Havana Club and so on. So they're now in place over the first half no I don't think they had yet a strong impact.

Thank you Gilles, Alexan, thank you ladies and gentlemen for joining us. And that includes our first half call. Thank you.