Remy Cointreau profit beat calms nerves about tough H1

By Dominique Vidalon

PARIS (Reuters) - French spirits group Remy Cointreau beat forecasts with record annual operating profits on Thursday, and reiterated its pledge to overcome a tough start to its new financial year, particularly in the United States.

Chief Executive Eric Vallat told analysts he was confident about a second-half rebound as the company was well placed to benefit from trends such as "premiumisation, consumers drinking less but better, and at home mixology (cocktail making)".

The maker of Remy Martin cognac and Cointreau liquor reiterated a forecast for flat organic sales in the 2023/24 financial year, with steady profitability, reflecting weaker U.S. demand and high year-ago comparables.

"With the normalization of consumption in the United States amplified by a high basis of comparison in the first half, and our drive to reduce inventories, we expect sales and profitability to hold steady in 2023/24 on an organic basis," Vallat said in a statement.

By 0945 GMT, Remy Cointreau shares were flat at 143.9 euros, after rising as much as 6% in early trade after the profit beat.

During the COVID-19 pandemic, Remy Cointreau and rivals such as Pernod Ricard benefited from people drinking more expensive types of alcohol at home.

There are, however, signs that spirits industry growth is slowing, notably in the United States, as positive effects from the pandemic fizzle out.

In the United States, where Remy Cointreau raised prices in April, its brands also face competition from buoyant demand for tequila, Vallat said.

Tequila is among the categories Remy Cointreau could be looking at for possible acquisitions "if prices normalise," he said.

Remy Cointreau expects group sales to decline strongly in the first half of 2023/24 due to a "very strong" fall in the U.S.

A steep rebound would follow in the second half in the U.S combined with a steep rise in China and the rest of the world, it said.

In the first quarter alone, group sales were expected to fall by some 35% on an organic basis, before sequentially improving, Finance Chief Luca Marotta said.

For the year ended March 31, 2023, solid demand for its premium cognac, along with cost controls, lifted operating profit by 16.2% on an organic basis to 429.6 million euros ($458.6 million), beating expectations for a 14.4% rise in a company-compiled consensus of 18 analysts.

The company previously reported group sales were 1.54 billion euros, marking an organic rise of 10.1%.

($1 = 0.9367 euros)

(Reporting by Dominique Vidalon; Editing by Varun H K and Mark Potter)