Remy Cointreau gives upbeat outlook, weathering China COVID woes

By Dominique Vidalon

PARIS (Reuters) -French spirits group Remy Cointreau said on Friday it was confident over prospects for this year, predicting a strong start to business in its first quarter to June amid COVID-linked restrictions in key market China.

For its fiscal year ended March 31, the maker of Remy Martin cognac and Cointreau liquor kept a forecast for “very strong” organic growth in operating profit as it reported a sales rise of 27.3%, in line with expectations.

Due to higher marketing and communication spending and a tougher comparison base in the second half, year to March 2022 profits – which Remy will unveil in June – would be driven solely by first-half growth, the group reiterated.

The market consensus is for organic operating profit growth of 38%.

Finance Chief Luca Marotta told analysts that fiscal year 2022/23 would be “a strong year of pricing power at group level”, with cognac price increases in a high single to double-digit range in the United States.

The company was also targeting double-digit organic sales growth in the first quarter, notably driven by U.S. revenues, he said.

The pandemic has helped Remy’s drive towards higher-priced spirits to boost profit margins long term, accelerating a shift towards premium drinks, at-home consumption, cocktails and e-commerce.

“Its high-end positioning, the strong level of desirability of its brands and the rarity of its eaux-de-vie and aging spirits give it excellent pricing power,” the group said in a statement.

By 0943 GMT, Remy Cointreau shares were up 2.68% at 191.2 euros.

“Q4 sales broadly in line, confident tone on outlook despite China lockdown should re-assure,” Credit Suisse analysts wrote in a note.

Group sales for the year were 1.313 billion euros ($1.38 billion), an organic rise of 27.3% in line with a company-compiled consensus, thanks to strong demand for premium cognac in China, the United States and Europe.

Full-year sales at the Remy Martin division, which makes the bulk of group profit, rose 26.3%. In China, cognac sales grew at a double-digit rate.

In the fourth quarter alone, organic cognac sales fell 16.7%, compared with expectations of a 15.9% decline.

This reflected a previously flagged voluntary management by the group of its strategic inventory ahead of sharp April 1 price increases, as well as the impact of COVID-related lockdown measures in China in March. In mainland China alone, cognac sales showed a double-digit fall in the fourth quarter.

Larger spirits rival Pernod Ricard said on Thursday that COVID-19 restrictions in China, the war in Ukraine, and a normalisation of its U.S. business could mean softer sales in its April-June fourth quarter.

($1 = 0.9505 euros)

(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta, Subhranshu Sahu, Bradley Perrett and John Stonestreet)