A woman holds a glass of Cognac at the Remy Martin headquarters in Cognac, southwestern France. Picture: REUTERS
A woman holds a glass of Cognac at the Remy Martin headquarters in Cognac, southwestern France. Picture: REUTERS

Paris — Remy Cointreau reported higher-than-expected annual profits, thanks to improving demand for its premium cognacs in China, and predicted further profit growth this year.

The maker of Remy Martin cognac and Cointreau liqueur, said it was making faster-than-expected progress on its plans to sell higher-priced spirits to boost profit margins, and the company raised its medium-term profitability forecasts.

Remy Cointreau, which wants to become the world leader in top-end spirits, 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 demand in China.

Remy’s strategy differs from that of rival Pernod Ricard, which has launched brands that are less expensive in China.

Remy’s operating profit for the year ended March 31 rose to ¤226.1m ($254.50m), representing an organic growth of 13.8%. This was above the company-compiled consensus of analysts’ forecasts for a profit of ¤211.5m, and above a prediction for organic growth of 10.6%.

Its earnings were boosted by lower costs and robust sales in the US and in China of higher-priced spirits such as Louis XIII cognac, which sells for $3,000 a bottle, and Remy Martin cognac.

Remy Cointreau, Pernod and British drinks group Diageo have all faced pressure on sales of cognac and other luxury goods in China following a government crackdown on luxury gift-giving and personal spending by Chinese civil servants.

That had caused Remy to start to focus on the US, which is now its top market for cognac, although Remy said that demand in Greater China was back, with sales up in double-digit terms for 2016/17.

In June 2015, Remy Cointreau had said its strategy to sell higher-priced spirits would drive its current operating margin to 18%-20% of sales by 2020.

Having reached a margin of 20.7% of sales in financial year 2016/17, Remy Cointreau said it now expected a margin of between 21.5% and 22.5% by 2019/20.

Reuters

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