November 22, 2018 / 6:58 AM / 21 days ago

UPDATE 2-Remy reassures on China as drinks group toasts robust results

* Shares outperform drop in broader stock market

* H1 current op profit 138 mln euros vs forecast 135.1 mln

* CEO predicts “very good Chinese New year” performance (Adds CEO comments, further details)

By Dominique Vidalon

PARIS, Nov 22 (Reuters) - French spirits group Remy Cointreau beat expectations for first-half operating profit on Thursday and said it saw no signs of a slowdown in China, where demand for its premium cognac is thriving.

The maker of Remy Martin cognac and Cointreau liquor is accelerating a drive to sell higher-priced spirits to boost profit margins.

Finance chief Luca Marotta said he was “okay” with market estimates for a 13.5 percent rise in full year 2018/19 current operating profit at constant rates and scope.

Markets are on edge over trade tensions between Beijing and Washington that could impact Chinese consumers, whose appetite for branded goods has supported a luxury industry rebound over the past two years.

Chief Executive Valerie Chapoulaud-Floquet, however, said Remy had not seen any slowdown in China so far, after growing by between 20 percent and 30 percent in the country in the first half.

“We can confirm that China remains very buoyant. Our Chinese customers are very confident. We had a very good Mid-Autumn festival and expect a very good Chinese New Year in February,” said Chapoulaud-Floquet.

Remy’s French rival Pernod Ricard also said last month that it had benefited from strong demand in China and India as Pernod reported higher sales, although Pernod cautioned that sales growth would moderate later on.

SHARES OUTPERFORM WEAK MARKET

Remy Cointreau said group operating profit for the six months to Sept. 30 totalled 138 million euros ($157 million), for like-for-like growth of 10.1 percent and beating a consensus forecast for a profit of 135.1 million euros.

Remy shares were up 0.6 percent in mid-session trading, bucking the broader Paris CAC-40’s 0.6 percent decline.

“We like Remy’s category exposure and see upside as the CEO rolls out her vision as a super-premium business but at 27.8 times estimated 2019 earnings (Staples 20.1 times), the shares need upgrades to perform,” said Jefferies analysts, who have a “hold” rating on Remy shares.

Remy Cointreau has been focusing on selling spirits priced at $50 a bottle or more, as part of a strategy that has benefited from a rebound in Chinese demand as well as from solid sales in the United States, its top market.

Its products include Louis XIII luxury cognac that sells for over $2000 a bottle.

Operating profit at the Remy Martin cognac division, reached 119.5 million euros in the first half, accounting for 86 percent of group profit.

This marked a like-for-like rise of 11.3 percent and reflected strong demand in Asia and Australia, as well as positive trends in America and the travel and retail sectors.

$1 = 0.8776 euros Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta and Susan Fenton

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