PARIS (Reuters) – Remy Cointreau expects a 45-50% fall in mid-year operating profit but a strong recovery in the second half driven by China and the United States, the French spirits company said on Thursday.
The maker of Remy Martin cognac flagged more favourable spirits demand trends in the United States in the past few weeks where the coronavirus crisis is boosting consumption at home.
There were also encouraging signs in China where bars, restaurants and clubs are reopening faster than expected in some key regions such as Guangdong and Shanghai.
The more optimistic outlook and a slightly better than forecast operating profit for the 2019/20 fiscal year ended March 31 lifted Remy Cointreau’s shares more than 7% to 120.20 euros by 1135 GMT.
Meanwhile, new boss Eric Vallat vowed to pursue the group’s push towards higher-priced spirits to boost margins, setting new medium-term targets.
“We maintain the value strategy, but we will refine it and make it more efficient. The challenge for us is to deliver the right offer at the right place. Demand exists and will keep growing,” he said.
The company forecast a fall in first-quarter sales of around 45%, smaller than previous guidance of 50-55%, and a “more moderate decline” in the second quarter.
Finance chief Luca Marotta told a conference call that the market consensus, which expects a 9.1% fall in fiscal year 2020/21 current operating profit and a 5.7% drop in sales on a like-for-like basis “makes senses” at this stage.
Remy’s 2020/21 fiscal year started on April 1.
Remy also reported a well-flagged 22% fall in like-for-like current operating profit for the fiscal 2019/20 year that ended March 31, reflecting weaker sales and higher costs.
Its operating profit margin fell to 21% of sales from 23.5%.
Eric Vallat took over as CEO in December 2019 from Valerie Chapoulaud-Floquet, architect of Remy’s push towards higher-priced spirits.
On Thursday, Remy Cointreau reiterated its goal to become a “leader in exceptional spirits” while also building a business model more focused on sustainability.
The group now targets a gross margin of 72% and an operating margin of 33% by 2030.
(Reporting by Dominique Vidalon; editing by Sudip Kar-Gupta, Jason Neely and Emelia Sithole-Matarise)
