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Resurgent Chinese cognac demand stirs Remy Cointreau's upbeat outlook

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Dominique Vidalon
·3-min read
FILE PHOTO: The logo of Remy Cointreau SA is pictured in the Cointreau distillery in Saint-Barthelemy-d'Anjou near Angers
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By Dominique Vidalon

PARIS (Reuters) -Remy Cointreau on Friday gave higher-than-expected operating growth guidance for its 2020/21 fiscal year and was upbeat over prospects for this year, after rebounding demand for its premium cognac in China and the United States lifted sales at the French drinks group.

"We have increased confidence in the group's 2020/21 current operating profit outlook. We also feel very confident over FY 21/22 prospects," Finance Chief Luca Marotta told analysts during a call.

In China - which accounts for around 25% of Remy Cointreau's group profit - sales scored triple-digit growth in January to March compared with a year earlier when the economy was locked down due to the coronavirus.

The group had an "excellent" Chinese New Year performance this year as younger consumers increasingly craved premium cognacs as well as Scottish single malt whiskies, Marotta said.

In the United States, Remy Cointreau is benefiting from a "new paradigm" of buoyant at-home consumption, a craze for cocktails, rising e-commerce sales and consumer appetite for high-end spirits, trends that would last after the COVID-19 crisis, he added.

The maker of Remy Martin cognac and Cointreau liqueur follows Pernod Ricard - owner of Martell cognac and Mumm champagne - which on Thursday also offered an upbeat outlook for the coming months as COVID-19 restrictions on bars and restaurants start to ease.

In China in particular, where measures to curb the coronavirus were lifted before other markets, drinks companies said they had performed well during Chinese New Year celebrations.

Luxury goods groups operating in fashion, such as Hermes and have also reported rebounding sales in the first three months of 2021 in China, offsetting enduring COVID-19 lockdowns in some European countries.

Remy Cointreau said it expected organic growth of around 10% in operating profit for the 2020/21 fiscal year, which ended on March 31, after sales in its fourth quarter rose by 15.1%.

It said a favourable comparison to 2020 levels, when pandemic lockdowns came into force globally, as well as more buoyant consumer trends in the United States would also help a strong start to the new financial year.

However, the 15% growth in the fourth quarter did not fully recover sales to pre-pandemic levels given group sales in January-March last year dropped 25.4% due to the impact of the pandemic.

The 10% profit full-year growth guidance - which would mark a rebound from a 22% fall in group profit in the full year 2019/20 - exceeds current analysts' expectations for a 7.6% profit rise.

Sales for the three months to March 31 came in at 229.4 million euros ($275.9 million), marking a like-for-like rise of 15.1%. That was slightly below analysts' expectations for 15.9%.

Remy Cointreau shares were down 0.5% at 0954 GMT, but have gained 13% this year and rose 39% in 2020.

Cognac sales alone stood at 162.5 million euros in January-March - a like-for-like rise of 18.2%.

Cognac demand in the United States remained strong, boosted by at-home consumption, albeit somewhat moderated by the group's previously announced decision to manage its strategic inventories.

Foreign exchange and the effects of acquisitions and divestments would impact operating profit in full-year 2020/21 by 5 million euros and 2 million euros respectively, Remy Cointreau said.

($1 = 0.8315 euros)

(Reporting by Dominique Vidalon;Editing by Sudip Kar-Gupta, Jane Merriman and Susan Fenton)