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Rémy Cointreau Gives Confident Outlook Despite China COVID Woes

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.

Cognac Divison 

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. 

News by Reuters, edited by Donna Ahern, Checkout. For more Drinks stories, click here. Click subscribe to sign up for the Checkout print edition.

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