China, U.S. help put Remy Cointreau on track for return to profit growth

By Dominique Vidalon
·2-min read
FILE PHOTO: A bottle of Cointreau is displayed at the Carre Cointreau in the Cointreau distillery in Saint-Barthelemy-d'Anjou, France

By Dominique Vidalon

PARIS (Reuters) - Drinks maker Remy Cointreau beat first-half profit forecasts on Thursday and predicted a strong recovery in the second half, driven by China and the United States.

For the 2020/21 full year, the maker of Remy Martin cognac and Cointreau liqueur forecast "positive" like-for-like current operating profit growth and said it remained confident of its ability to emerge stronger from the crisis.

Chief Executive Eric Vallat said that following robust sales during the Mid-Autumn festival in China, the group expected strong demand for the Chinese New Year festivities driven by its Club cognac.

The pandemic also "does not change our strategic vision for 2030", Vallat said, adding that it in fact bolstered its push towards higher-priced spirits to boost profit margins long term.

The coronavirus crisis was "an accelerator of some trends we strongly believe in, among which the move upmarket of the spirits industry, at-home consumption, mixology (cocktails) and the rise in e-commerce," he said.

Remy Cointreau, which raised prices on Oct. 1, planned another round of price hikes at the start of its next fiscal year in April, he said.

The positive profit growth forecast for the full year 2020/21 is better than analysts' latest forecasts for a 0.5% like-for-like decline.

It would also mark a rebound after group profit slumped 22% in 2019/20 due to weaker sales and higher costs.

Foreign exchange headwinds and one-off costs would however weigh by 5 million and 3 million euros, respectively, on current operating profit in 2020/21, it said.

Group current operating profit for the six months to Sept. 30 totalled 106.2 million euros ($126.6 million), or a like-for-like decline of 22.5%, as cost controls helped limit the fall.

That outperformed a company-compiled consensus of 18 analysts that forecast current operating profit of 101.1 million euros, down 26.1% on a like-for-like basis.

It also reflected already reported better-than-expected sales as a rise in sales to U.S households and the strong Mid-Autumn festival celebrations in China partly offset a slump in travel retail sales during the pandemic.

Operating profit at the Remy Martin cognac division, which makes more than 80% of group profit, totalled 93.6 million euros in the first half, or a like-for-like decline of 25.1%.

Already reported cognac sales fell 18.1% in the first half.

($1=0.8386 euros)

(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta, Clarence Fernandez and Susan Fenton)