Remy predicts further profit rise as cognac sales revive

Remy Cointreau reported a bigger than expected rise in profits on Thursday as demand for its premium cognac improved in China and it accelerated its drive to sell high-end spirits priced at $50 or more per bottle.

The maker of Remy Martin cognac, Cointreau liqueur and Mount Gay Rum also increased the dividend payout and predicted further growth in current operating profits in the current year that began on April 1st.

Operating profit for the year ended March 31st rose 6.1 per cent on a like for like basis to €178.4 million, beating the consensus market forecast for growth of 3.6 per cent.

The rise resulted from cost controls and robust sales of higher-priced spirits like the 1738 Accor Royal and Club cognac brands in the United States, now the group’s largest market, and improving demand for cognac in China in the second half.

The United States is now a bigger market for Remy Cointreau than China, accounting for slightly over 30 per cent of sales against nearly 20 per cent for China.

The Remy Martin division, the group’s largest, saw its operating profit rise 6.4 per cent. This offset a 2.8 per cent decline in the Liqueurs and Spirits division, due to difficult economic conditions in Russia and Greece.

Sales of cognac and other luxury goods fell in China following a government crackdown on corruption and conspicuous consumption in 2014. This has hit other spirits makers, including larger rivals Diageo and Pernod Ricard .

Changes Remy Cointreau made to its distributors’ network in China and Chinese wholesalers’ caution had weighed on group cognac sales, causing a sales drop in the first-half.

But demand for Remy Cointreau cognac started to improve in China in the second half of the year.

However, French rival Pernod Ricard said last week that it was too early to predict a rebound in the Chinese market.

Reuters