Remy Cointreau is struggling to persuade analysts and the market that it is on an upward curve, following the release of disappointing half-year profits figures.
Remy Cointreau’s share price dropped by an initial 3.5% today (30 November) after the firm was hammered by a EUR45m impairment charge on its Greece-based Metaxa brand, causing net profits to slump by 65%. The size of the charge came as a shock to some.
However, the group’s underlying operating profits also missed analysts’ estimates, even though currency gains and high-end Cognac in China lifted them by 24% to EUR81m.
With the group’s loss-making Champagne business up for sale and Metaxa dragging down the spirits and liqueurs business, a bet on Remy Cointreau looks more and more like a gamble on the Chinese Cognac market. For now, China’s thirst remains strong, but some analysts are cautious on the road ahead for Remy.
“We expect consensus earnings forecasts to see some downgrades,” said Evolution Securities in a note. It expects Remy Cointreau’s share price to go below EUR50 per share. The price sat at EUR50.9 by 15:00 today, down 2.3% for the day.
Still, Evolution is giving Remy the benefit of the doubt for the time being. “The firm trading momentum in the group’s owned brands should not be overlooked and, with a pick-up below the line expected in H2, we are happy to remain neutral for now.”
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By GlobalDataRemy Cointreau said that it will increase its advertising spend in core markets and will continue to shift its portfolio towards more profitable brands. It is clearly confident in its ability, but it needs a solid second-half performance, and perhaps a successful Champagne business sale, to boost the confidence of others.
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