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Remy results: Annual profit up – Chinese slowdown to weigh on first half results

June 12, 2013

* Expects lacklustre Chinese sales of premium cognac in H1

* Confident of mid-to-long term growth despite weak Europe

* Annual profit up 12.3 pct, above company guidance

* Shares down 0.8 percent

French spirits group Remy Cointreau forecast lacklustre Chinese sales of premium cognac in the first half of its new financial year, joining other luxury firms in suffering from Beijing’s crackdown on giving gifts for favours.

The maker of Remy Martin cognac and Cointreau liqueur, however, remained confident over its longer-term prospects in China and the United States, where solid demand drove an expected 12 percent rise in annual underlying profit.

Despite an uncertain economic backdrop in Europe, Remy said cost control and its focus on affluent customers would help it to continue profitable growth over the medium to long term.

“I can confirm that the start of the year is soft in China … We expect a lacklustre first half in China and its impact will be felt by the company,” Chief Executive Jean-Marie Laborde said on Tuesday after the group’s annual results.

European drinks makers, along with other consumer goods companies, have expanded into fast-growing emerging markets such as China in recent years, hoping to offset slowing sales of premium spirits in austerity-hit Europe. But the industry is finding it hard to sustain growth rates in some markets.

Remy and rivals Diageo and Pernod have all reported lower growth rates in the Asia Pacific region in recent months, in part because of a crackdown on gift-taking and personal spending by Chinese civil servants, as well as slowing economic growth.

This weighed most on demand from older Chinese customers who have a taste for vintage spirits such as Remy’s Louis XIII cognac, priced at 2,500 euros ($3,300) per bottle.

Cognac demand from younger Chinese drinkers remained robust, Laborde said.

“These policies are hurting more the higher end of the market, which in our view will limit the contribution to growth of the price/mix in FY 2014,” said Liberum Capital analysts, referring to the boost to revenue from selling high price goods.

By 1150 GMT, Remy shares were down 0.8 percent at 86.05 euros, still outperforming a weak European sector, which was down 2.12 percent.

Asia-Pacific contributes 39.9 percent of Remy sales against 33 percent for America and 27.1 percent for Europe, the Middle-East and Africa. Asia-Pacific also makes up 60.2 percent of sales in the Remy Martin cognac division.

Laborde said these ratios were “satisfactory”, adding Remy would strive to expand its footprint in fast-growing African markets in the coming years.


Remy’s operating profit excluding exceptional items for the year ended March 31 rose 12.3 percent to 245.4 million euros on a like-for-like basis, which was above company guidance, but broadly in line with analyst expectations for 12 percent growth.

Remy had forecast core profit growth of around 10 percent on a like-for-like basis.

The company’s cognac division, which accounts for the bulk of group sales and profits, achieved like-for-like operating profit growth of 18.6 percent, thanks to robust demand from the United States and Russia and higher prices, notably in Asia.

Elsewhere the Liqueurs and Spirits division saw its profit drop 16.7 percent on a like-for-like basis to 45.2 million euros, due to higher sales and marketing investments.

Remy also took an impairment charge of 15.9 million euros tied to the value of its 27 percent stake in Chinese group Dynasty Fine Wines Ltd, which warned in February that it made a loss in 2012. Dynasty has yet to publish its annual results.

Remy, which bought single malt Scotch whisky distiller Bruichladdich, ended the year with net debt of 265.5 million euros, a rise of 76.9 million.

It said it would pay a cash dividend of 1.40 euros a share. Last year it paid an ordinary dividend of 1.30 euros plus a special dividend of one euro per share.

Source: Reuters