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China, U.S. to fuel Remy Cointreau recovery after strong third quarter

·2-min read
FILE PHOTO: A bottle of Remy Cointreau is seen in this illustration picture

PARIS (Reuters) - French spirits group Remy Cointreau beat third-quarter sales forecasts on Friday and said it was confident that demand for its premium cognac in China and the United States would fuel a profit recovery this year.

Finance Chief Luca Marotta told a conference call his teams were very optimistic about business prospects in China ahead of the Lunar New Year celebrations starting on Feb. 12.

In the United States, where the COVID-19 crisis is boosting drinking at home, customers were increasingly turning to premium cognacs and whiskies, he said.

"We feel very confident over our outlook and well on track for a strong topline performance in the second half," Marotta said, after Remy reported a 25.1% jump in third-quarter sales.

For the 2020/21 full year, Remy Cointreau upheld a forecast of positive like-for-like current operating profit growth and reiterated that it remained confident of its ability to emerge stronger from the COVID-19 crisis.

The positive growth forecast would mark a rebound from a group profit fall of 22% in the full year 2019/20.

Marotta later told analysts that he was "comfortable" with the market consensus for full-year 2020/21 profit targeting a 5% rise in like-for-like terms.

At 1058 GMT, Remy Cointreau shares were down slightly at 146.10 euros, with JP Morgan analysts saying that the profit guidance "feels disappointing/conservative given the exceptional third quarter".

The maker of Remy Martin cognac and Cointreau liqueur also forecast like-for-like sales growth to be buoyant in the fourth quarter, though lower compared with its third-quarter revenue due to strategic inventory management.

Group sales reached 350 million euros ($425.99 million) in the three months ended Dec. 31, against an average forecast of 14.3% organic growth in a company-compiled poll of 15 analysts.

Sales at the Remy Martin cognac division, which makes the bulk of group profit, surged 33.1%, outperforming expectations of an 18.2% growth.

The third-quarter performance marked a strong rebound from a 16.4% sales slump in the first half and reflected catch-up effects in the United States, where at-home cognac consumption remained buoyant, the company said.

A recovery in Chinese demand also accelerated during the Mid-Autumn Festival and the "Double Eleven" or Singles' Day online shopping festival held on Nov. 11, 2020.

Although their decline slowed in the third quarter, duty-free sales remained weak due to travel restrictions and the slow reopening of bars and restaurants from the coronavirus-led lockdown continued to weigh on Southeast Asian sales.

Foreign exchange and scope effects would weigh by 8 million euros and 2 million euros, respectively, on current operating profit in full year 2020/21, Remy Cointreau said.

The French company's fiscal year starts on April 1 and ends on March 31.

($1 = 0.8216 euros)

(Reporting by Dominique Vidalon, Editing by Benoit Van Overstraeten, Sherry Jacob-Phillips and Louise Heavens)