Analysis - Remy Cointreau outlook “much worse" than expected
Rémy has suffered from a slowdown in China
Rémy Cointreau is on course for a 30% plunge in operating profits in the second-half of its financial year as Cognac problems persist in China, an analyst has forecast.
The French spirits group, which posted a 6% operating profits drop in yesterday's H1 results, is on a “slow burn” before performance improves, Bernstein's Trevor Stirling said today (27 November). “The outlook ... came in much worse than even we expected,” Stirling said.
“The company guided to a less favourable second half of the year and a substantial double-digit decline (approx 20%) in current operating profit at the end of the financial year," he added. "This implies an over 30% decline in H2.”
A slowdown in China offset first-half growth in the US and Europe for the Rémy Martin Cognac brand, which posted a 10% fall in sales and a 12% operating profits drop in the six-month period. Cognac sales in China have dragged since the introduction late last year of anti-extravagance measures by authorities in the country.
However, Stirling echoed Rémy's belief that Cognac's future in China remains bright.
He said: “We remain firm believers in the medium- to long-term growth prospects for Cognac in China and for Rémy Cointreau, and we model double-digit organic sales and EBIT growth in full-year 2015-16.”
Rémy said yesterday that Rémy Martin's “fundamentals” in China remain unchanged and that it has continued to invest in the brand during the slowdown.
I'm calling it, people. Today is the day that I feel confident enough to conclude that the China 'crisis' is not a blip....
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