French drinks group Remy Cointreau reassured investors that Chinese consumers are still thirsty for cognac as it showed orders from wholesalers picked up after a slowdown in the second quarter.
The maker of Remy Martin cognac and Cointreau liqueur stuck by its goal for a “substantial” rise in full-year earnings, although it forecast more moderate growth in the second half of 2012 because of Europe’s uncertain economic climate.
Remy posted a forecast-beating 18 percent rise in underlying first-half operating profit, driven by demand for its premium cognac in China and the United States.
“We are still very positive and seeing no signs that the Chinese consumer would be losing interest in cognac… We remain extremely confident on China,” Chief Executive Jean-Marie Laborde told a news conference.
Slowing economic growth and China’s crackdown on conspicuous consumption ahead of the political leadership change that just took place in Beijing – amid public anger over widening income inequality – had given rise to concern that the country’s demand for luxury goods might be cooling.
Remy Cointreau added to these fears itself last month when it reported a sharp slowdown in second-quarter sales growth and said Asian wholesalers were holding back on new cognac orders after stocking up in the previous quarter.
Remy however had emphasised that demand for its very high-end cognac such as Louis XIII, which sells for 2,500 euros per bottle, largely escaped the slowdown.
Shares in the drinks group jumped nearly 8 percent, lifted by the more positive tone on Chinese growth. CM-CIC analyst Francis Pretre said there had been signs of a “sharp recovery” in the gift market for high-end goods in China in recent weeks.
Austerity-hit Southern Europe however remains a tough spot, Remy said.
“We think it’s not going to improve in Europe except in eastern Europe and notably Russia,” Laborde told journalists.
Remy, which has a market capitalisation of 4.3 billion euros, competes with spirits makers France’s Pernod Ricard and Britain’s Diageo.
PREMIUM WHISKY AMBITION
Operating profit for the six months to September 30 reached 141.5 million euros, beating the 128 million average estimate in a Thomson Reuters I/B/E/S poll of analysts.
Remy Martin cognac, which makes the bulk of group sales and profit, achieved a 27.3 percent rise in operating profit.
Remy, which recently bought single malt Scotch whisky distiller Bruichladdich for 72.8 million euros ($94.38 million), said net debt rose to 266 million euros from 114 million at end-September 2011.
The purchase is aimed at tapping booming demand for premium whisky, notably in Asia, and could be followed by other acquisitions in that sector if Remy finds the right brands.
Remy plans to invest 5-6 million euros to quadruple production at Bruichladdich, which stands at 50,000 cases, Laborde said.
The stock has gained 44 percent so far this year, outperforming the Stoxx Europe 600 food and drinks sector index , which is up 20 percent. ($1 = 0.7713 euros)