Rémy Cointreau sees drinkers’ taste for premium cognac generating profits

The logo of Remy Cointreau SA is pictured at its headquarters in Paris, France, January 21, 2019. REUTERS/Benoit Tessier

PARIS, Jan 25 (Reuters) – Rémy Cointreau (RCOP.PA) is confident that demand for its premium cognac in China, the United States and Europe will support profit growth this year after the French spirits group exceeded its sales forecast in the third quarter.

The pandemic has spurred Remy Cointreau’s drive to shift to more expensive spirits to boost its long-term profit margins, accelerating consumers’ shift to premium drinks, home drinking, cocktails and e-commerce.

Group sales for the three months to Dec. 31 were €440.5 million ($498.1 million), an organic increase of 21%, beating a company-compiled consensus of 18 analysts for an increase of 15.1%.

Sales of the Remy Martin cognac division, which makes 90% of the group’s profits, rose 19.4% to 332.7 million euros, also above analysts’ estimates of 14.9%.

“Remy’s pace sets the tone for a strong earnings season. We expect low-to-mid-single-digit consensus gains,” Citi analysts said in a note.

The consensus is currently forecasting organic growth in current operating income of 38% over the full year 2021-22.

At 07:02 GMT, Remy shares rose 0.7% to 192.40 euros.

For the Chinese New Year which begins on February 1, Rémy Cointreau said he was “cautiously optimistic given the COVID restrictions which will lead to market share gains”.

“This wording suggests the market could be hurt by the shutdowns, but Remy is confident he will outperform,” the Credit Suisse analysts wrote.

The company said the third-quarter performance reflected “remarkable” sales growth in China, driven by demand for its Club cognac and strong e-commerce sales during the Singles’ Day online shopping bonanza.

U.S. cognac demand also remained strong in the third quarter, with premium brands such as Louis XIII cognac selling for more than $2,000 a bottle, Remy Martin XO and 1738 Accor Royal outperforming.

For the 2021/22 financial year, Rémy Cointreau maintained a forecast of “very strong” organic growth in current operating income and strong organic growth in sales, and reiterated its confidence in its ability to outperform the premium spirits market.

Due to higher marketing and communication expenses and a more difficult comparison basis in the second half, annual profits will only be driven by first-half growth, the group said.

The French company‘s fiscal year begins on April 1 and ends on March 31.

($1 = 0.8843 euros)

Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta, Shounak Dasgupta and Jane Merriman

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