October 19, 2018 / 5:38 AM / a year ago

Remy Cointreau confident on China after strong second-quarter

PARIS (Reuters) - French spirits maker Remy Cointreau (RCOP.PA) beat second quarter sales expectations on Friday and said it had seen no slowdown in China, a market that helped power demand for its Remy Martin cognac.

FILE PHOTO: Oak barrels are stored in a cellar for storing rare and old cognac at the Remy Martin factory in Cognac, southwestern France, November 6, 2015. REUTERS/Regis Duvignau

The maker of Mount Gay rum also kept its forecast for higher profit growth this year.

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

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

But Marotta said the group was “very satisfied” with demand in China during the Mid-Autumn festival, which he said “gives us a huge amount of confidence over the third quarter”.

Remy Cointreau, which makes the Louis XIII luxury cognac that sells for over $2,000 a bottle, would be particularly vulnerable to a slowdown in China, analysts have said.

“We are not seeing any slowdown in global demand in China, so far we are very optimistic on China, more optimistic than a few months ago,” Marotta said.

The group has focused 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 solid sales in the United States, its top market.

Like-for-like sales of 329.8 million euros ($378 million) were up 9.1 percent for the quarter to Sept. 30, topping the 7.8 percent rise seen in a company-compiled consensus of analysts and an advance of 5.9 percent achieved in the first quarter.

Sales of Remy Martin cognac, which account for about 71 percent of group turnover, rose 12.2 percent in the second quarter, beating a rise of 11.1 percent in the first.

The company attributed the higher cognac sales to “continuing excellent trends in Greater China, as well as in other key markets of the Asia-Pacific region.”

Despite robust figures, Remy Cointreau shares were down 2.11 percent at 101.9 euros.

“We think that at an estimated EV/EBIT 2018/19 of 21 times, the shares are currently correctly valued”, analysts at Kepler Cheuvreux said in a note, maintaining their “hold” rating.

Remy rival Pernod Ricard (PERP.PA) this week also reported strong quarterly sales helped by strong demand in China and India.

Last month, British rival Diageo (DGE.L) said it expected organic net sales growth in 2019 to be “broadly” in line with the last fiscal year when it grew by 5 percent, although it warned of foreign exchange hits.

Reporting by Dominique Vidalon; editing by Sudip Kar-Gupta and Jason Neely

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