French spirits company Remy Cointreau expressed confidence over its growth prospects in China, where robust demand for its premium cognac underpinned annual sales growth.
The maker of Remy Martin cognac and Mount Gay rum, which is trying to sell more of its higher priced spirits to boost profit, kept its target for profit growth for the full year.
Finance chief Luca Marotta told analysts that Remy was “very pleased” with its performance during the Chinese New Year in February, when sales of all its cognac brands grew double-digit.
“We are confident we can continue to deliver double-digit sales growth in China,” said Marotta, who added he remained “ok” with market estimates which currently stand at 13.5 percent growth for full year current operating profit.
Remy Cointreau reports full-year earnings on June 6.
Sales came in at 1.216 billion euros ($1.36 billion) for the full financial year, which ended on March 31, a like-for-like rise of 7.8 percent, broadly in-line with analyst estimates.
This reflected an 11.9 percent jump in cognac sales driven by strong demand in China and a robust U.S. market and a 4 percent rise in the Liqueurs and Spirits division.
Remy’s shares were flat in mid-session trading, with the stock up by around 20 percent so far in 2019.
“While China continues to show strong performance, wider macro concerns will likely continue to weigh on sentiment,” said Jefferies analysts in a note, keeping a “hold” rating on Remy.
Remy Cointreau said that – as it had previously flagged – the fourth quarter reflected the negative impact of an earlier timing of the Chinese New Year in early February that had led to advance shipments of cognac in the third quarter.
As a result, Remy’s cognac sales reached 209.1 million euros in the fourth quarter, a rise of 7.9 percent on a like-for-like basis. That increase, however, represented a slowdown from a rise of 15.6 percent in the third quarter.
Last week, Remy’s larger rival Pernod also reported a sales slowdown, due partly to conditions in China.
There are global fears about an economic slowdown in China and also concerns that trade tensions between Beijing and Washington could have a knock-on effect on Chinese consumers, whose appetite for top brands has supported a rebound in the global luxury industry over the past two years.
Remy Cointreau, which makes the Louis XIII luxury cognac that sells for over $2,000 a bottle, would be particularly vulnerable to a slowdown in China, analysts have said.
Commenting on prospects for the 2019/20 financial year, Marotta said the end to distribution contracts in the Czech Republic, Slovakia and the United States would dent sales by 56 million euros.
Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta and David Evans
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