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China's Thirst For Cognac Helps Rémy Top Profit Forecasts

Published on Jun 6 2019 12:50 PM in Drinks tagged: Trending Posts / Remy

China's Thirst For Cognac Helps Rémy Top Profit Forecasts

Rémy Cointreau handed investors a special dividend of one euro per share after reporting a stronger-than-expected 14% rise in annual operating profit, helped by cost controls and robust demand for its...

Rémy Cointreau handed investors a special dividend of one euro per share after reporting a stronger-than-expected 14% rise in annual operating profit, helped by cost controls and robust demand for its premium cognacs in China.

The maker of Rémy Martin cognac and Cointreau liqueur said its strategy of selling higher-priced spirits to boost profit margins was delivering strong results, and the company said it had met its margin goals a year in advance.

Operating profit for the year ended 31 March to €263.6 million ($296 million) from €236.8 million the previous year.

That translated into a margin of 21.7% of sales at constant exchange rates and business structure, marking an organic gain of 1.3% points from the previous year.

The results beat the consensus analyst forecast of €260.2 million in profit, and 13.4% organic profit growth. Organic profit growth excludes the impact on profit from acquisitions, divestments and foreign exchange.

Margin Over Medium Term

The company said it remained ambitious about its operating margin over the medium term.

Remy Martin cognac, which makes over 80% of the company's profit, saw its operating profit rise 18% to 235.6 million euros, driven by strong demand in the Asia Pacific region, notably China, and the United States.

Remy 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.

Remy's Louis XIII luxury cognac - which sells for over $3,000 a bottle - has been in demand in China but in recent years has also benefited from growing demand from rich consumers elsewhere, especially in the United States.

The group reiterated on Thursday it expected high-end spirits to grow to 60-65% of its sales over the medium term from 53% at present.

In line with that strategy, Remy Cointreau last month disclosed exclusive talks to buy most of the operations of the JR Brillet cognac house to secure additional vineyards and stocks of aged eau de vie fruit brandy, which is key to meeting growing demand for cognac.

News by Reuters, edited by Donna Ahern Checkout. Click subscribe to sign up for the Checkout print edition.

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