Comment - Rémy Cointreau Survives Profits Drop

Rémy Cointreau has emerged relatively unscathed from a drop in full-year profits, thanks to its potential in premium spirits.

Rémy Cointreau's net profits fell by 18% for the year to the end of March, to EUR70.5m (US$103m), after the group was hit worse-than-expected by the lower value of its Metaxa brand in crisis-hit Greece.

However, seeing as the EUR45m impairment charge on Metaxa had already been reported in the firm's first-half, investors found it easier to dismiss the issue. Instead, Rémy's steady share price gains of the past few months held firm today (9 June).

Last week, just-drinks reported on how the group was judged to have secured a good price for its Champagne business, which it has sold to family-owned French firm EPI for EYR412m. In addition, China's thirst for Rémy Martin Cognac has propelled group sales and there is talk that the firm may have an acquisition warchest of up to EUR1bn.

Today, Rémy dropped the biggest hint yet that it may pursue takeovers following the Champagne sale.

While the group reiterated in its results announcement that the sale will help to "fund accelerated growth in major current markets, as well as in markets with strong potential for future growth", it also said that it would "look closely at other growth opportunities should they present themselves".

MF Global analyst Andy Smith says that he remains positive on Rémy. "The company has excellent exposure to the Chinese Cognac market, which is seeing rapid growth in volumes, with positive price/mix trends," Smith said in a note today.

Rémy's underlying net profits, excluding one-off charges, rose by almost 17% to EUR107.5m for the year. In addition, the firm has cut net debt by 34%, to EUR328.9m.

While the group is well-placed in emerging markets, such as China and Russia, MF Global's Smith noted that an upturn in the US spirits sector also bodes well. "Rémy derives a third of EBIT from the US, where it has a strong position in the on-trade so should benefit from the recovery as it gathers momentum," he said.

The group, then, looks to be starting life after Champagne with some good momentum.