Remy first warned of the sales drop in October

Remy Cointreau has warned that full-year operating profits are to plunge by between 35% and 40% as its sales continue to be hit by anti-gifting measures in China.

The fall, announced in a trading update today (17 April), is greater than the company's estimate of a 20% profits decline in November. It also beats analysts' predictions of a 30% fall made at the same time.

Today, Remy said net sales for the 12 months to the end of March fell by 13.5% to EUR1.03bn (US$1.43bn). Sales for Cognac brand Remy Martin, which accounts for about three-quarters of Remy's total sales, were down 23% year-on-year.

The company blamed destocking efforts following the introduction of Chinese Government measures to restrict conspicuous consumption among officials. The measures, launched early last year, have weighed heavily on Remy because of the company's high exposure in the country. About half of Remy's Cognac profits hail from China.

“Remy Martin was adversely affected throughout the financial year by the Chinese Government’s anti-extravagance policy, which had a negative impact on the consumption of premium spirits,” Remy said today. “Furthermore, the decline in sales was intensified by the group’s desire to reduce inventory levels in its Chinese distribution channels.”

The sales drop was first reported in October, when Rémy warned investors of Rémy Martin's underperformance in China.

When trading opened today, Remy's share price dropped by 6%. The stock, which trades on the Euronext Paris bourse, has since recovered slightly.

The company will release full details of its full-year performance on 5 June.