Remy Cointreau Gives Upbeat Outlook, Weathering China COVID Woes
French spirits group Remy Cointreau RCOP.PA has said that it was confident over prospects for this year, predicting a strong start to business in its first quarter to June amid COVID-linked restrictions in key market China.
For its fiscal year ended 31 March, the maker of Remy 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.
Due to higher marketing and communication spending and a tougher comparison base in the second half, year to March 2022 profits - which Remy will unveil in June - would be driven solely by first-half growth, the group reiterated.
The market consensus is for organic operating profit growth of 38%.
Finance chief Luca Marotta told analysts that fiscal year 2022/23 would be "a strong year of pricing power at group level", with cognac price increases in a high single to double-digit range in the United States.
The company was also targeting double-digit organic sales growth in the first quarter, notably driven by US revenues, he said.
The pandemic has helped Remy'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.
"Its high-end positioning, the strong level of desirability of its brands and the rarity of its eaux-de-vie and aging spirits give it excellent pricing power," the group said in a statement.
"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 year were €1.313 billion, an organic rise of 27.3% in line with a company-compiled consensus, thanks to strong demand for premium cognac in China, the United States and Europe.
Full-year sales at the Remy Martin division, which makes the bulk of group profit, rose 26.3%. In China, cognac sales grew at a double-digit rate.
In the fourth quarter alone, organic cognac 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 PERP.PA said on Thursday 28 April 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.