French spirits group Rémy Cointreau said on Friday it was confident over prospects for this year, predicting a strong start to business in the first quarter despite COVID-related restrictions in key market China.
For its 2021/2022 full fiscal year ended 31 March, the maker of Rémy Martin cognac and Cointreau liquor kept a forecast for 'very strong' organic growth in operating profit as it reported a sales rise of 27.3%, in line with expectations.
Higher Marketing Costs
Due to higher marketing and communication spending and a tougher comparison base in the second half, full-year profits will be driven solely by first-half growth, the group reiterated.
"The group is today perfectly positioned to take advantage of new consumer trends. Its high-end positioning, the strong level of desirability of its brands and the rarity of its eaux-de-vie and ageing spirits give it excellent pricing power," the group said in a statement on Friday.
The pandemic has helped Rémy's drive towards higher-priced spirits to boost profit margins long-term, accelerating a shift towards premium drinks, at-home consumption, cocktails and e-commerce.
By 0705 GMT, Rémy Cointreau shares were up 0.16% at €186.50.
"Q4 sales broadly in line, confident tone on outlook despite China lockdown should re-assure," Credit Suisse analysts wrote in a note.
Group sales for the 12 months to 31 March came in at €1.313 billion ($1.38 billion), marking an organic rise of 27.3%, that was in line with a company-compiled consensus for 27.2% growth, thanks to strong demand for premium cognac in China, the United States and Europe.
Sales at the Rémy Martin cognac division, which makes the bulk of group profit, rose 26.3% in the full year.
In China cognac sales grew at a double-digit rate for the full year, led by Club, Louis XIII, and XO brands.
However, in the fourth quarter alone, cognac organic sales fell 16.7%, compared with expectations of a 15.9% decline.
This reflected a previously flagged voluntary management by the group of its strategic inventory ahead of sharp 1 April price increases, as well as the impact of COVID-related lockdown measures in China in March.
In mainland China alone, cognac sales showed a double-digit fall in the fourth quarter.
Larger spirits rival Pernod Ricard said on Thursday that COVID-19 restrictions in China, the war in Ukraine, and a normalisation of its US business could mean softer sales in its April-June fourth quarter.