April 19, 2017 / 5:50 AM / 2 years ago

Remy Cointreau expects further pick up in Chinese demand

PARIS (Reuters) - Increasing Chinese demand for Remy Cointreau’s (RCOP.PA) premium cognac helped offset some disappointment over sales figures at the spirits group, which said it was optimistic over its growth prospects for the new financial year.

The French company, whose brands include Remy Martin and Cointreau, stuck to its target for higher operating profits for the 2016/2017 financial year on Wednesday, with a focus on selling more of its higher-priced spirits to boost earnings.

Chief Financial Officer Luca Marotta told analysts he was “fine” with the consensus of estimates for full year operating profit growth of 10-11 percent.

Remy, which publishes its annual profit figures on June 8, reported annual like-for-like sales rose by 4.7 percent to 1.095 billion euros (915.57 million pounds), although its fourth quarter sales growth came in below analysts’ expectations.

After an initial drop in its shares, they recovered on its upbeat comments over China and were up 1.04 percent at 1137 GMT, with the stock up around 15 percent so far in 2017.

“The high-end nature of Remy’s portfolio means the group benefits from rebounding spirits consumption in China and trading-up trends in global spirits,” Liberum analysts, who have a sell rating on the stock, said.

Remy’s strategy differs from that of rival Pernod Ricard (PERP.PA) which has launched less-expensive brands in China.

Remy Cointreau, Pernod and British drinks group Diageo (DGE.L) have all faced pressure on sales of cognac and other luxury goods in China following a government crackdown on luxury gift-giving and personal spending by Chinese civil servants.

That had caused Remy to start to focus on the United States, which is now its top market for cognac, although Marotta said demand in Greater China was back, with sales up in double-digit terms for 2016/17.

“The Chinese New Year was very, very good. Mainland China is a clear engine. We gained significant market share in value.”

Remy Martin Club cognacs were a key growth driver in China while deluxe Louis XIII cognac, which sells for $3,000 per bottle, and Cointreau were also in strong demand.

Cognac sales, which count for more than half of group revenues, rose 6.2 percent in the quarter. This followed a 22.3 percent jump in the third quarter, when sales had been lifted by the Chinese New Year festival.

Editing by Sudip Kar-Gupta/Biju Dwarakanath/Alexander Smith

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