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Shift To Premium Spirits Helps Rémy Weather China Lockdowns

France's Rémy Cointreau on Thursday predicted a strong start to its new financial year, as broad demand for its premium spirits helps to offset inflationary pressures and the impact of COVID lockdowns in China.

The maker of Rémy Martin cognac and Cointreau liquor made the upbeat comments after reporting higher-than-expected operating profit growth for its financial year ended 31 March.

"On the strength of our progress against our strategic goals, new consumption trends and our robust pricing power, we are starting the year 2022-23 with confidence," Eric Vallat, chief executive officer said in a statement.

Long-Term Drive

The pandemic has helped Rémy's long-term drive towards higher-priced spirits to boost profit margins, accelerating a shift towards premium drinks, at-home consumption, cocktails and e-commerce.

Vallat told journalists that for the new fiscal year, Rémy expected "solid profitable growth" as price increases and cost control would help mitigate inflationary pressures.

In the short term, Vallat said, "I can confirm we are expecting double-digit organic sales growth in the first quarter despite the lockdown in China and high comparables."

With China accounting for 15-20% of group sales, growth would be led by demand from other regions, notably the United States.

Strong demand for its premium cognac in China and the United States, along with tight cost management, lifted the company's 2021/22 organic operating profit by 39.9% to €334.4 million ($356.3 million), beating the 38.6% forecast by analysts.

Dividends

Reflecting its confidence, Rémy said it would pay shareholders an ordinary dividend of €1.85 per share in cash and an exceptional dividend of €1.

"Rémy guides to another year of strong growth and margin improvement, led by its strong pricing power, which suggests upside to consensus organic EBIT of +10%," Credit Suisse analysts said in a note.

Rémy Cointreau shares jumped more than 3% in early trade, before handing back some gains.

The company reiterated its 2030 goals for a gross margin of 72% and an operating margin of 33%.

That compares with the 68.6% and 25.5% achieved respectively in 2021/22.

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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