Rémy has suffered from a slowdown in China

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.