French spirits group Remy Cointreau delivered higher first-half profits that came above forecasts, helped by demand for its premium cognac in China and by a tight rein on costs.
The maker of Remy Martin cognac and Cointreau liquor, which is accelerating a drive to sell higher-priced spirits to boost profit margins, also kept its goal to grow current operating profit on a comparable basis in the current financial year.
Remy Cointreau has been focusing on selling spirits priced at $50 a bottle or more, as part of a strategy that has benefited from a rebound in Chinese demand as well as from solid sales in the United States, its top market.
Current group operating profit for the six months to 30 September reached €138 million, a like-for-like growth of 10.1%.
This compared with a company-compiled consensus of 19 analysts which forecast current operating profit of €135.1 million, and like-for-like growth of 10.3%.
China Rebound
Last month, Remy's French rival Pernod Ricard also reported that it had benefited from strong demand in China and India as Pernod posted higher sales, although Pernod cautioned that sales growth would moderate later on.
Operating profit at the Remy Martin cognac division, reached €119.5 million in the first half, accounting for 86% of group profit.
This marked a like-for-like rise of 11.3% and reflected strong demand in Greater China, Singapore, Australia, and Japan, as well as positive trends in the American market and in the travel and retail sectors.
In October, finance chief Luca Marotta told analysts he was "OK" with market estimates for a 13.5% rise in full-year 2018/19 current operating profit at constant exchange rates and scope, and added he had seen no slowdown in China.
Nevertheless, markets are on edge over trade tensions between Beijing and Washington and that could impact Chinese consumers, whose appetite for branded goods has supported a luxury industry rebound over the past two years.
Remy Cointreau shares are down nearly 10% this year, trading at 32 times estimated 12-month forward earnings against 22 times for rival Pernod Ricard, a valuation that is closer to that of luxury stocks.
News by Reuters, edited by Checkout. Click subscribe to sign up for the Checkout print edition.
