Remy Cointreau Joins LVMH in Calling Cognac Rebound in China

  • Sales in fourth quarter beat estimates on China, U.S. demand
  • Shares climb 8.6% as company sees potential to raise prices

French distiller Remy Cointreau SA reported fourth-quarter sales that beat estimates as the Chinese market improved, sending the shares to their highest level in a year.

Sales rose 9.8 percent on an organic basis in the three months through March, the company said in a statement Tuesday. Analysts expected a 5.6 percent advance, according to the median of 15 estimates. The stock rose 7.8 percent to 74.28 euros as of 11:28 a.m. in Paris.

The company will begin raising prices in China, where it gained market share during the country’s New Year celebrations, Remy Cointreau Chief Financial Officer Luca Marotta said on a call with investors. The company is quite optimistic that it can raise prices in China 2 percent to 3 percent in the medium-term, he added.

“The trend of improvement has been clearly demonstrated in today’s results,” Simon Hales, an analyst at Barclays, said by phone.

Cognac makers are giving conflicting views on the Chinese market, where sales of high-end spirits had been hamstrung by a government clampdown on graft. Hennessy-cognac owner LVMH signaled a gradual recovery in that market earlier this month after two years of falling demand. Pernod Ricard SA, the market leader in China with cognac brands brands Martell and Noblige, said in February that it expects demand for spirits to shrink in the near-term.

“While we applaud the strong quarter, we remain confused as to how real the Chinese cognac recovery is,” Javier Gonzalez Lastra, an analyst at Berenberg, said in a note to investors. Shipment figures from the Bureau National Interprofessionnel du Cognac, a trade association representing producers and merchants of the spirit, are also not fully supportive of a recovery, he added.

Remy Cointreau said it’s seeing outstanding demand for brands including Bruichladdich scotch and The Botanist gin in the Americas. The popularity of so-called classic cocktails in the U.S. is driving sector consolidation amid the rising use of liqueurs. Last month, Italian distiller Campari agreed to acquire Cointreau-competitor Grand Marnier for $760 million.

Full-year revenue was 1.05 billion euros ($1.2 billion). Remy Cointreau said in June last year that it intends to become the global leader in spirits sold for $50 a bottle or more, a market that’s been growing faster than lower-priced spirits.

Remy Cointreau shares have gained 13 percent this year, while Pernod Ricard has dropped 1.3 percent. LVMH, which gets a fifth of its earnings from alcohol, gained 6.4 percent.

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