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3 years ago
UPDATE 2-Remy Cointreau flags slow recovery for cognac in China
January 22, 2015 / 7:12 AM / 3 years ago

UPDATE 2-Remy Cointreau flags slow recovery for cognac in China

* Q3 sales 269.1 mln euros, down 1 pct like-for-like

* Q3 cognac sales up 0.4 pct vs -11.8 pct in Q2

* Eyes growth in full year organic sales, operating profit

* Cognac shipments to China up in Q3, sales still negative (recasts with CFO call, shares, analyst)

By Dominique Vidalon

PARIS, Jan 22 (Reuters) - Remy Cointreau said that cognac shipments to its key Chinese market increased in the third quarter but cautioned that local demand did not show clear recovery signs ahead of next month's Chinese New Year.

Remy Cointreau, like rivals LMVH, Diageo and Pernod Ricard, has been hit by the Chinese government's crackdown on ostentatious spending and slowing economic growth in the world's second-biggest economy.

The maker of Remy Martin cognac, Cointreau liqueur and Mount Gay Rum maintained its target of delivering organic growth for sales and current operating profit in the year to the end of March.

Cognac sales halted their decline in the third quarter, driven by robust demand for premium qualities in the U.S., while shipments to China improved on weak year-ago comparables.

However, closely-watched sales of cognac by wholesalers to Chinese stores, bars or restaurants were still down 10-15 percent in value at end-December and "showing no signs of improving," Chief Financial Officer Luca Marotta told analysts.

"There is a wait-and-see attitude of wholesalers ahead of the Chinese New Year and we do not want to go too fast in adjusting (upwards) our cognac shipments," he said.

The Chinese New Year, which begins on Feb. 19 this year, is usually a boost for sales of premium tipples.

Remy Cointreau said group sales reached 269.1 million euros ($311.73 million) in the three months to Dec 31, a like-for-like decline of 1 percent, compared with a fall of 5.5 percent in the second quarter.

Cognac sales, which account for more than half the company's revenue, rose 0.4 percent year-on-year in the quarter, a marked improvement from an 11.8 percent fall in the second quarter and a 15.3 percent decline in the first quarter.

The figures beat analysts expectations of a 5-6 percent decline for the cognac division in the quarter.

But Remy benefited from weak comparables as cognac sales fell 32 percent in the year-ago quarter due to de-stocking.

"While the Chinese cognac market is still not entirely out of the woods, the market does seem to be stabilising and that is clearly good news," analysts at Mirabaud said in a note.

Sales of Remy Martin in China account for about 20 percent of Remy Cointreau's total sales and between 30 and 35 percent of its operating profit, according to analysts.

By 1235 GMT Remy Cointreau shares were up 0.6 percent, outperforming a 0.7 percent decline in the STOXX Europe Food & Beverage index.

$1 = 0.8633 euros Editing by Andrew Callus and Vincent Baby

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